Senior Housing Construction Recovery Brings With It Higher Costs

Construction resources abandoned during the recession are back in use thanks to a new-found demand in the senior housing sector, according to a report published this week.

Materials that went unused and labor left on the sidelines as a result of the recession have been absorbed by new demand, according to the report. The research, conducted by the American Seniors Housing Association and Des Moines-based national construction firm The Weitz Company, is the partnership’s biannual effort to track the cost of construction in the senior living sector.

“The key takeaway here is the recession is definitely over for construction,” Michael Hass, director of senior living for The Weitz Company, tells SHN.


As a result of the absorption of material and labor capacity, however, the cost to add new resources for each project increases, making for measured inflation. Construction costs for assisted living facilities, for example, registered at up to $290 per gross square foot in August, as compared to a maximum of $265 per gross square foot in January. The cost to build cottages rose from up to $178 per gross square foot in January to $189 per gross square foot in August.

Hass says this inflation is pretty consistent across the country. Higher demand requires additional resources to keep up, though, meaning inflation is likely to stick around for some time.

“The primary method to attract those resources will be dollars, so we expect inflation to remain strong for at least the next few quarters,” Larry Gaeve, The Weitz Company’s senior vice president for senior living, said in a news release.


The dash to stay ahead has raised concerns that the supply of senior housing could surpass demand, according to a Dow Jones report. Such building sprees could result in higher vacancy rates, analysts said, and lower rent increases for real-estate firms that own senior housing.

“There are markets in the country where there’s a real risk of overbuilding in the short term,” Hass says. “In the long term, the next 10 to 20 years, there won’t be any issues whatsoever.”

Written by Kourtney Liepelt

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