{"id":30158,"date":"2021-09-27T04:47:00","date_gmt":"2021-09-27T11:47:00","guid":{"rendered":"https:\/\/www.yardi.com\/blog\/?p=30158"},"modified":"2021-09-30T06:47:21","modified_gmt":"2021-09-30T13:47:21","slug":"property-management-preparedness","status":"publish","type":"post","link":"https:\/\/www.yardi.com\/blog\/property-management-preparedness\/","title":{"rendered":"Property Management Preparedness"},"content":{"rendered":"\n

Imagine it: your property, November 1st<\/sup>, 2021. Your team is scheduled to turn six units when you get a numbing report. Your trusted suppliers are out of stock on carpet and semi-gloss paint for trim. You scramble to find a new supplier, but the cost is 14% higher and expedited shipping costs are extreme. It\u2019s not an unlikely scenario, and you can potentially avoid it.<\/p>\n\n\n\n

More than 80% of the world\u2019s goods are transported by sea. The latest records indicate that sea freight charges have increased by 547% over their seasonal average. The result on land will be more out-of-stock items and higher costs on everyday goods for your property. Property managers would be wise to plan ahead on items that they need most.<\/p>\n\n\n\n

International cargo shipping rates and times increase<\/strong><\/p>\n\n\n\n

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The average price of a 40-foot shipping container has quadrupled from this time last year and there was a surge of more than 53% in July, reports the Wall Street Journal<\/a>.<\/p>\n\n\n\n

Congested ports are one of the leading problems. In the first five months of 2021, Sea-Intelligence ApS of Denmark reported record-breaking delays. Nearly 700 ships were more than a week late to their destinations along the West Coast. For comparison, there were 1,535 late arrivals throughout all of 2012-2020. This summer, a daily average of 30 containers wait in queue outside of the Ports of Los Angeles.<\/p>\n\n\n\n

Other factors include a shortage in containers, skeleton crews at docks, labor shortages at manufacturers and rising demand as retailers reopen in the West.<\/p>\n\n\n\n

When might delays plateau? Analysts foresee serious delays at least until after the Lunar New Year of 2022, mid-February at the earliest. Most Chinese factories shut down for the holiday, halting production and shipping. This may afford a few days where in-progress shipments continue while manufacturing pauses (temporarily easing the influx of ships to ports). But once workers return, they\u2019ll have to play catch up. The delays will continue, at least for a while.<\/p>\n\n\n\n

How do shipping delays impact property owners?<\/strong><\/p>\n\n\n\n

Brian Bourke, chief growth officer at Seko Logistics based in Itasca, Ill. recommends placing large trans-Pacific orders at least two months in advance of normally anticipated dates.<\/p>\n\n\n\n

\u201cGlobal trade right now is the hottest restaurant in town,\u201d he said. \u201cIf you want to get a reservation, you need to plan it out two months in advance.\u201d<\/p>\n\n\n\n

As a result, property managers can expect shipping delays and higher prices on imported goods. Though the shipping backlog has been growing for months, price increases were nominal and less frequent. Companies lock in contractual rates with container lines. Yet as their annual contracts end, new contracted rates will reflect higher shipping costs which will, in turn, be passed to consumers.<\/p>\n\n\n\n

HSBC Holdings Plc estimates that a 205% increase in freight costs translates to about a 2% price increase<\/a> for European producers. (The cost increase is currently closer to 550%.) Canadian businesses are passing price increases as high as 20%<\/a> on to consumers for bulky items like appliances. Estimates on U.S. consumer price increases vary, but the consensus is that prices will rise.  <\/p>\n\n\n\n

Some goods simply won\u2019t be available, large and small items alike. From the coffee stocked in the leasing office to furniture for furnished units, \u201ctemporarily out-of-stock\u201d will become common on supplier websites. In these cases, freight costs can compose more than 60% of product cost, become cost prohibitive for suppliers.<\/p>\n\n\n\n

Property manager game plan<\/strong><\/p>\n\n\n\n

A few tips can help property managers navigate the turbulent waters ahead.<\/p>\n\n\n\n