Price Increases in Senior Living in a Post Hurricane Environment

A number of clients and prospective clients have asked me what we are seeing in our Florida market for prices in a post-hurricane environment.  I don’t blame them for being concerned.  I am too.  Past hurricanes have had a devastating impact on pricing, so the concern is legitimate.  The interesting thing about this hurricane is that the hype was significant, the damage to structures was not.  It is surprising how few blue tarps I have seen in my travels, indicative of this.

The two exceptions to this are drywall and metal studs.  Drywall will have controlled distribution to suppliers (allocation) starting 1/1/18, and though no one knows for sure how much that will affect pricing, speculation is material prices will go up 10-20%.  This would equate to about 60 cents per square foot of building area.  Not a surprise due to the destruction in Texas, which will demand board.  Metal stud material is also expected to increase a similar %, which would equate to about the same cost increase per square foot for buildings constructed with metal studs.  We don’t see much reason for this from a demand standpoint, and the best reason we can get is “because they have a story they can tell.”  There was a concern about PVC piping due to the destruction of the only plant in the US that produced the resin that goes into it, but we are not hearing much here.

That doesn’t mean prices aren’t going up, unfortunately.  Material suppliers generally raise their prices the first of the year, so that is a concern.  And subcontractors, in general, are at full capacity, so labor continues to have upward pricing pressure.  But it is interesting to look at long term price increases in construction.  The last few years have seen numbers go up about 4.5%, well ahead of inflation, but industry sources show that construction costs since 2008 have gone up only 15%, or a compounded 1.56% a year.  Not bad.

Peter Douglas, P.E.
The Douglas Company

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