Covid-19 is having a lasting impact on the present and future of senior housing design, and the costs associated with development.
The pandemic is accelerating trends that were already in progress such as well-programmed outdoor spaces, more multipurpose rooms, and larger residential apartments. And it is forcing new tweaks to designs including well-appointed staff break areas, shared workspaces for residents, and separate entrances for residents, visitors and staff.
These changes come with increased costs, which have been further impacted by the pandemic. Materials pricing was on the rise for years, prior to Covid-19. The virus continues disrupt global supply chains, suppliers are frequently changing quotes on materials, and some contractors face delays on components
Developers and operators interviewed by Senior Housing News for this article would not share specific dollar amounts projects in their pipelines have risen, but acknowledged the effect of Covid-19 on development costs, and the need to find tradeoffs to keep pro formas in check.
Architects and general contractors interviewed for this story are seeing double digit increases in raw and prefabricated materials. The pressures will continue until Covid-19 is brought to heel, said Greg Blythe, director at The Weitz Company.
The Des Moines, Iowa-based firm is a full-service construction company, general contractor, design-builder and construction manager, and is feeling these pressures on senior housing and multifamily projects it is involved with, first hand.
“It’s a snowball effect,” he said.
Design and plant changes
Many facets of senior housing design were already undergoing transformation prior to the pandemic, Thrive Senior Living Chief Investment Officer Alan Moise told Senior Housing News.
The Atlanta-based operator’s portfolio encompasses 12 communities in five states, all of them purpose-built. The company has been incorporating new design elements into its communities for some time, and that gained momentum during the pandemic. Multipurpose indoor rooms, intentionally programmed outdoor spaces, and larger units for residents are among the design elements that have gained importance.
Covid-19 led Thrive to “sharpen the pencil” and add tweaks to these design approaches. Moise noted that independent living comprises half of the unit mix for developments currently in the company’s pipeline, which is driving much of the programming around outdoor space and amenities.
One amenity Thrive added to its communities is a workshare room for residents to handle personal or professional business with privacy. The company discovered that independent living prospects were requesting two-bedroom units and converting one of the bedrooms into a home office. Having the workshare room allows Thrive to build more one-bedroom independent living apartments.
“It’s become a staple for us in the design programming over the last 18 months,” Moise said.
Another design element stemming from Covid-19 is the creation of enhanced staff breakrooms, which go above and beyond traditional staff quarters, incorporating wellness elements to give team members – especially caregivers – the opportunity to recharge during shifts.
These retreat centers will provide solid long term returns with recruitment of new employees and staff retention, Moise believes, as ongoing labor issues within the industry have been exacerbated during the pandemic.
More developers and operators are asking for flexibility in interior designs, WJW Architects Partner Todd Wiltse told SHN. The Chicago-based firm designs market-rate and affordable senior housing.
Additionally, WJW’s clients are looking to install more sophisticated HVAC systems, or retrofit existing systems, to improve air flow and exhaust and add air purification.
The experience of senior living living and skilled nursing operators creating dedicated wings for residents testing positive for Covid-19 is leading to an increase in multipurpose rooms that can be used in future quarantine situations for serving meals or hosting small groups for activities.
“If you have to lock down a wing, there still needs to be a space within, where you can at least have limited amenity functions,” Wiltse said.
Some of WJW’s clients are also engaging with the firm on enhanced staff breakrooms, as well as segregated entrances for staff, which can reduce the potential for spreading a virus to visitors or outside a community, if a frontline employee becomes infected. And there is a growing call for more sanitation stations.
These trends and modifications to senior housing design, along with the disruptions of Covid-19 on global supply chains, accelerated materials pricing that was already increasing due to an increase in construction activity, said Greg Blythe, director of mechanical, electrical and plumbing (MEP) pre-construction services at The Weitz Company.
He noted that raw and pre-fabricated materials prices have increased between 12% and 20% during the pandemic, and continue to climb. Sheet metal costs have increased 120% over the past two years.
Construction materials are so in demand these days that developers and contractors are warned that price quotes from suppliers are subject to change in as little as 10 days, Blythe told SHN.
Wiltse is also seeing materials pricing increase for projects, particularly in HVAC materials. On the majority of WJW’s mid-range market-rate and affordable assisted living projects, the HVAC budget has traditionally been in the neighborhood of $10-$16 per square foot. Upgrading to a “Covid-19 best practices” system would increase that budget to between $25 and $30 per square foot, if not beyond.
“On an overall project percentage basis, that might translate into an additional surcharge of around 5%-8% on an otherwise apples-to-apples building,” Wiltse said.
Among the features of a best practices system are:
- a hot and cold hydronic system, or a variable refrigerant flow (VRF) system
- fresh air individually ducted to each apartment
- fresh air supply increased beyond Energy Code requirements
- energy recovery equipment tied to exhaust systems
- high-MERV (minimum efficiency reporting value) filtration of all return air
Blythe adds that there are many benefits beyond just coronavirus infection control that come with these kinds of upgrades, including energy savings, resident and staff comfort, odor control, and overall wellness.
LCS Development is observing these same macro pricing trends, Senior Vice President/Managing Director of Development Jason Jorgenson told SHN. The Des Moines, Iowa-based developer, part of The LCS Family of Companies, has recommended its clients position themselves to lock in pricing at favorable quotes, in order to keep construction pro formas in check.
Trade-offs mitigate pricing increases
The increase in materials pricing is forcing developers, contractors and operators to look for ways to keep larger development costs in check.
WJW and its clients review everything from cosmetic changes to building facades to rooms dedicated to single amenities that were secured during the pandemic, such as theaters and game rooms, Wiltse told SHN.
“Maybe those start falling by the wayside because they’re not going to be safe to use in [another pandemic] scenario,” he said.
He believes that multipurpose rooms will gain more favor in a post-pandemic environment, because they provide operators with flexibility for myriad situations and settings. A room that hosts a yoga class one day can be used as a vaccination station the next.
LCS Development is using its newly launched company-wide initiative, Eversafe 360°, to find inefficiencies in building designs and identify tradeoffs to keep development costs in check. For instance, Jorgenson believes that developers and operators can pay for new enhancements by reducing the amount of non-revenue generating space within a building.
One part of the Eversafe 360° initiative focuses on common area flex space, which maximizes space during emergency situations to keep residents safe. For example, dining areas can be designed to flow outdoors, improving air flow and encouraging social distancing.
“Just because construction costs are going up, doesn’t mean the sky is falling. Home values are strong and financing is available at favorable rates,” Jorgenson said.
Thrive was reevaluating dining operations and dining room design prior to the pandemic. Covid-19 added urgency to this effort, Moise told SHN.
One development will incorporate garage doors to allow outside air to flow, and serve as overflow outdoor dining. But the company’s footprint does not make this a one-size-fits-all solution. Thrive will maximize its outdoor space in markets where the climate is accommodating.
So far, the rising costs have not impacted Thrive’s lease-up pro formas. Moise believes that savings can be recaptured through a combination of market position and revenue management, rather than being passed on directly to consumers.
“On the whole, the changes discussed do translate to a higher cost basis, doesn’t necessarily translate into higher rents,” he said.