While furniture retailers are evaluating how to manage the supply chain fallout from coronavirus, builders and developers in Palm Beach County are preparing for shortfalls in some construction materials.
City Furniture always orders plenty of inventory ahead of the Chinese New Year in January, when furniture factories and other businesses are shut down for a couple of weeks to celebrate the holiday.
But this year, thanks to the cororavirus, City Furniture president Andrew Koenig is uncertain when the factories will fire up again.
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Making matters worse is COVID19’s effect on a factory where the company makes most of its furniture: Vietnam.
Koenig said the managers of the factory are Chinese and went back to China for the Chinese New Year.
Since then, the managers have not been able to return to work in Vietnam, Koenig said.
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"We’re on the phones with our factory owners and quality control folks talking to people about manning the factories," Koenig said.
Furniture retailers aren’t the only companies evaluating how to manage the supply chain fallout from the burgeoning coronavirus.
Many items used in construction are made in China, where the virus began.
As a result, builders and developers doing business in Palm Beach County’ go-go construction environment are preparing for shortfalls in some construction materials.
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One major item that could be in short supply: Cabinets.
Construction companies must decide whether to wait to see if the Chinese economy chugs back to normal quickly and will be able to make cabinets, or else find another source for them.
At Kaufman Lynn Construction in Delray Beach, the company decided not to risk it.
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Last week, the company placed orders for cabinets from manufacturers in the United States.
"We made a move to change to domestic manufacturers from Asia," said Chris Long, chief operating officer of Kaufman Lynn Construction. "And we were able to do so without a cost increase because we were proactive and wanted to get ahead of it."
The company also opted to pay up front for the cabinets instead of the usual practice of paying when the cabinets are delivered. "It's different than business as usual," Long said.
When the cabinets are completed, the manufacturer has agreed to store them until Kaufman Lynn needs them.
Waiting, on the other hand, could mean backlogs or higher prices if other companies decide to seek out U.S. cabinet makers.
Kast Construction of West Palm Beach is evaluating where it can obtain materials for its projects outside of China, but it is mostly in a wait-and-see mode, said Dave DeMay, senior vice president.
Many of the materials Kast needs were ordered six months ago. And ordering new items is typically done months in advance as well.
During a corporate retreat on Feb. 26, DeMay said an economist from Associated General Contractors, an industry trade group, also advised a wait-and-see approach.
Completing projects should not be a problem due to alternative sources for products, said Francis Greenburger, chairman of Time Equities of New York.
Kast is building Time Equities’ CasaMara apartment and retail complex at 3111 S. Dixie Highway in West Palm Beach. The project consists of 300 rental apartments and 16,000 square feet of retail space.
A few years ago, Greenburger said, Time Equities built a high-rise in Chicago using glass from Canada. "There are alternative sources in North and South America," Greenburger said.
Kast’s DeMay agreed: "We can get materials and supplies from all over the world."
Shai Zelering, managing director, real estate, for Brookfield Asset Management in New York, concurred. But he noted that every other developer will be seeking to tap those some alternate suppliers.
Brookfield plans a $100 million redevelopment of the PGA National Resort & Club, the Palm Beach Gardens property that just hosted The Honda Classic golf tournament. The redo includes a renovation of all 339 hotel rooms, the clubhouse, the restaurants and the lobby.
The redevelopment is slated for completion in early 2022.
But it could be face delays if Brookfield has problems finding sources for construction material or furnishings for the property, Zelering said.