A combination of challenges have prolonged timelines for senior living projects since the onset of the COVID-19 pandemic, and those delays will become even more problematic as the senior living industry struggles to meet future demand, according to a new report from NIC Analytics.
As detailed in a blog post analyzing senior housing (independent living, assisted living, memory care and continuing care retirement communities), construction duration — the timeline from the moment a community breaks ground to its official opening — shows notable shifts over time that vary widely across the 140 markets watched by NIC MAP.
The data reveal a “clear and consistent” trend of increasing construction durations from 2015 to 2023, with a noticeable increase since the onset of the pandemic in 2020 — but they also show that the extended construction duration is not exclusively a post-pandemic trend, wrote Omar Zahraoui, principal at the National Investment Center for Seniors Housing & Care.
And there will be a “pressing need” for new construction to meet future demand and adapt to changing resident preferences: 41% of senior living communities are more than 25 years old, and the population of adults aged 80 or more years is projected to increase 35% by 2030.
Disruptions in the supply chain were blamed for construction backlogs early in the pandemic, with more recent challenges including labor shortages, inflation, increased construction wages and higher interest rates, Zahraoui said. Collectively, those factors affect various aspects of construction financing, elevate development costs and slow the pace of construction starts and completions, he concluded.
The median construction durations consistently have risen from 16 months in 2015 and 2016, to 19 months in 2019, to 25 and 24 months at their peak in 2022 and 2023, respectively.
Even before the pandemic, construction durations were on the rise, Zahraoui said, largely due to a project delivery boom from 2016 to 2020. In that timeframe, he said, the senior living market experienced a surge in new project completions, causing a temporary oversupply of units and declining occupancy rates. The result was a protracted construction process.
“Challenges stemming from the pandemic, high interest rates, and other economic factors only contributed to the observed prolonged construction duration,” Zahraoui wrote.
Construction durations are not uniform across markets, however. For senior living projects delivered in the past three years, 25% of communities were completed in fewer than 20 months, and another 25% took more than 30 months for delivery.
“The variability in construction durations, influenced in part by factors such as community type and size, also highlights the differences in access to capital and financing within the senior housing sector,” Zahraoui wrote. “Notably, even amidst the challenges posed by the pandemic, elevated interest rates, increased development costs and economic uncertainties, there remain senior housing operators who retain the ability to successfully secure financing and complete projects within reasonable and efficient timeframes.”
