The American Senior Housing Association (ASHA) and leading national construction firm The Weitz Company have published the results of their bi-annual cost of construction Special Issue Brief for Senior Living Construction.
The research suggests material and labor capacity created by the recession has been absorbed by new demand, particularly in multi-family projects.
“As that capacity is absorbed, the cost to add new resources and the profit expectations for each incremental project step up, which compounds inflation,” said Larry Graeve, senior vice president – Senior Living, The Weitz Company. “Adjacent industries have peaked, namely domestic oil and gas production, yet have not added capacity for senior living projects at this point.
“At the margin, the real estate industry needs to add resources to keep up with demand created by the improved economy, low cost of capital, and the recession lag in new construction,” said Graeve. “The primary method to attract those resources will be dollars, so we expect inflation to remain strong for at least the next few quarters.”