Lumber costs are slowly coming down from pandemic highs, but labor costs continue to rise along with a shortage of skilled labor, Senior Vice President Larry Graeve and Chief Estimator Amy Burk of The Weitz Co. wrote in an issue brief for the American Seniors Housing Association released this week.

There is reason to be optimistic, as momentum is starting to pick up in senior living construction, according to the brief. 

“Both the Architectural Billing Index and Construction Confidence Index have risen significantly in Q2 2021, proof of the growth that is occurring,” the authors said.

The Engineering News-Record’s Consumer Confidence Index rose to 68, which is 17 points over the previous quarter. This is a significant quarter-over-quarter increase, and it also is the single largest quarterly increase in 12 years, according to the brief.

“We see signs that 2022 may yield some relief as supply catches up with demand and lead times get back to normal … or at least a new normal,” according to the Des Moines, IA-headquartered architectural / engineering / construction firm.

Lumber reached a high of $1,950 in early May, then decreased to $800 per 1,000 board foot in July. Lumber futures are pointing even lower, Weitz said. 

“We anticipate prices to drop more as we continue to climb out of the pandemic,” Graeve and Burk wrote.

The per-square-foot cost of construction in summer 2021 still outpaced winter averages, but with lumber costs coming down, there is reason to believe the trend might reverse, they said.

The per-square-foot cost of construction in independent living has averaged $183 to $278 per gross square foot in the second quarter, depending on materials and finishes used, according to the brief, compared with $173 to $263 per gross square foot this past winter. Costs in assisted living have averaged $212 to $337 per gross square foot, and costs in skilled nursing have averaged $244 to $394 per gross square foot, compared to winter’s rates. At that time, assisted living averaged $200 to $316 per gross square foot, and costs in skilled nursing averaged $230 to $369 per gross square foot.

The labor shortage remains a concern for the authors, but they said they see the industry competing to bring more tradespeople to the field. 

“As the pandemic gets behind us, we expect to see a normalized inflation rate as manufacturing and production catches up to pre-pandemic levels,” Graeve and Burk wrote.