Backlogs for senior living construction projects are holding steady. Commodity prices have improved for some products, but labor rates continue to increase.
That’s according to a new report prepared for the American Seniors Housing Association by construction company, general contractor, design-builder and construction manager The Weitz Co..
The shortage of skilled workers and wage inflation continue to challenge contractors, with wages for skilled labor up 5.7%, according to the report.
“Subcontractors have steady backlog, and there is no motivation for them to get aggressive with pricing,” report authors Chris Harrison, Larry Graeve and Amy Burk wrote.
Double-digit inflation is in the rearview mirror, and “the current escalation outlook for the next 12 months is 3–6%,” according to the report.
The current economic outlook is pointing toward a soft landing rather than a full-blown recession in the coming months, the authors noted.
“While some projects are still on hold until interest rates come down, others are marching forward. The overall non-residential sector is strong, showing a 19.7% growth over last year, and the industrial sector is very strong, up 55% over last year,” according to Harrison, Graeve and Burk.
The Architectural Billing Index has risen for the second month in a row, they said.
The per-square-foot cost of construction this summer in independent living has averaged $233 to $354, depending on materials and finishes used, according to Weitz. Costs in assisted living, meanwhile, have averaged $269 to $439 per gross square foot, and costs in skilled nursing have averaged $309 to $491 per gross square foot.
Comparatively, in winter 2023, the per-square-foot cost of construction in independent living averaged $227 to $245, costs in assisted living averaged $263 to $429 per gross square foot, and costs in skilled nursing averaged $302 to $479 per gross square foot.