As Development Costs Rise, Some Turn to ‘Constructability’ Counselors

Rather than risk going over-budget and endangering the future success of a planned senior living community, some companies are turning to “constructability” counselors to help ensure their plans for a project can be carried out as envisioned—and as budgeted.

Senior living development projects are costing more to begin with and have increased 35%, on average, for assisted living and independent living development, according to Cain Brothers data. A large portion of the extra budget goes to “soft costs” such as interior finishes or marketing, while developer costs can also add up.

The cost of construction, on a square-footage basis, increased 57% in the last decade, according to Michael Zarriello, managing director at Cain Brothers’ San Francisco Office. 

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“Costs increased because amenities increased,” he explained. Some units, for example, went from having quartz countertops to granite, he says, while kitchens may be equipped with all-stainless steel appliances.

Another factor contributing to rising costs stems from “a lot of different people putting their hands in the [development] pie,” Zarriello says. Although soft costs of higher-quality amenities can be built into project budgets, it’s hard to account for the various changes made to plans along the way, and more senior living companies are looking for ways to make sure projects are completed on budget.

There’s often a divergence between the original vision—and budget—for a senior living community, and reality, says Darrell Smith, a registered engineer and vice president of senior living for Texas-based construction services firm Jamail & Smith Construction. His company’s services include offering counsel regarding the “constructability” of a project’s plans in terms of budget, timeline, and overall feasibility.

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“We take ownership and accountability for hitting target delivery dates and targeted budgets,” Smith says, describing the service as a “twist on the design-build concept.” 

The size of facilities being built and the quality of their amenities have driven costs up, Zarriello said, along with developer costs. But by assessing a project’s constructability, Smith’s team is able to make more accurate estimates for side development costs and whether the planned size of the building makes sense—the two biggest elements of where projects go over budget, he says.

Constructability counselors will work with project architects to essentially guide the project and makes sure it fits within the designated budget. 

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“You’ve got to have an understanding of senior housing logistics, construction material, and other foundational pieces,” he says. “Almost every project [we see] is too big for its budget. We keep things under control.” 

The construction services firm was awarded three projects in the past year and half that had all been designed by architects who “did what the owner wanted, but were over budget” by the time designs had been completed.

One project Jamail & Smith was awarded was 10% above budget as it was designed. “It delays the start, and funding limits are out of whack,” Smith says. “They have to go back and redesign.” Armed with the budget and knowledge of the vision for the project, constructability counselors can make tweaks to designs that enable the project to remain within monetary restraints. 

For another project, Jamail & Smith’s design-build team was able to reduce the footprint by 5,000 square feet without losing any functionality. 

Using services like those offered by Jamail & Smith’s constructability counsel still isn’t the “norm,” says Smith, but it’s receiving growing recognition—and it’s “definitely” the way to go.

“We’re learning that the cheapest approach, almost always, is not always the best approach,” he says, “especially for specialized, complex projects in senior housing.”

Written by Alyssa Gerace

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