Senior living renovation projects have stalled, but work related to most new developments and additions to existing campuses continues amid COVID-19, Larry Graeve, Chris Harrison and Amy Burk of The Weitz Company write in a new issue brief for the American Seniors Housing Association. Some projects have been broken down into several smaller phases in response to the pandemic, however.
Weitz is a full-service construction company, general contractor, design-builder and construction manager.
The per-square-foot cost of construction in summer 2020 in independent living has averaged $158 to $261 per gross square foot, depending on materials and finishes used, according to the brief. Costs in assisted living, meanwhile, have averaged $183 to $315 per gross square foot, and costs in skilled nursing have averaged $210 to $368 per gross square foot.
The calculations, based on an index of 100 cities, include general conditions, insurance, tax, bond and fee but not site construction costs.
On the labor front, according to the brief, unemployment in the construction industry is low relative to other industries, and good labor is still difficult to find. Most union contracts are multi-year agreements and thus are locked into previously set increases, and nonunion markets tend to follow the same trend, the authors wrote.
When it comes to materials, costs for lumber and steel have decreased significantly in the past 18 months, but such price decreases don’t usually last for long, according to the report. Cement prices continue to increase, but at a much slower rate than in recent years, the authors said. Longer lead times are needed for many products and equipment items due to the pandemic, and material deliveries to job sites are more complicated due to reduced production capacity or complete shut-down at some factories, they said.
Pricing varies depending on location, with areas seeing no inflation or inflation but at a lower rate — an annual rate of 2% to 4%, than previous years, when it ranged from 4% to 7%, according to the report. Subcontractor margins are the biggest factor affecting the inflation rate, the authors said.
The senior housing sector is in better shape than many other sectors, according to the authors, who note “significant drops” in the hospitality, entertainment, retail, office and petroleum sectors
Download the full report on the Weitz website.
