“The interest in new campus development from senior living providers and developers is significantly higher year over year,” despite commodity and supply chain challenges, rising interest rates and increased construction costs, according to a spring market report released Wednesday by The Weitz Co., a construction company, general contractor, design-builder and construction manager.
Housing starts are at a 16-year high, the authors noted, but forecasts indicate a slowdown in the second half of this year and into next year. Developers should anticipate longer lead times and/or inflated freight rates to remote job sites, they said.
Construction activity eventually will slow down, but the industry is working through pent-up demand from the pandemic, the experts said. Operators and developers are shifting their focus away from simply surviving the pandemic to planning ahead. Additionally, the growing demographic of adults aged 75 or more years over the next several years indicates a growing demand for senior living and care, they said.
Commodity and construction pricing increases are expected to level off by 2023.
“As we move forward, we anticipate an average inflation rate of 1% to 1.5% per month for the remainder of 2022. This rate should taper off in 2023 as the backlog decreases,” the authors wrote.
Nationally, the per-gross-square-foot cost of construction in the second quarter of 2022 in independent living is ranging between $196 and $298. Costs in assisted living, meanwhile, average between $226 and $369 per gross square foot, and costs in skilled nursing average between $260 and $413 per gross square foot.
Building cost increases range from 10% in some cities to 30% in others, depending on labor supply, commodity pricing and quantity of construction volume in a given market.
