Rising Development Costs

There was a recent article in Senior Housing News that discussed the rising development costs in senior housing being to the tune of a 6.4% increase last year according to a report created by CBRE.  During the same period, which was 2019, the average number of units per project decreased to 106 from 128. 

As you can imagine, two primary drivers of this were a robust construction market and the increasing labor expenses.  This isn’t necessarily new as the article also confirmed that overall U.S. construction activity has mostly increased over the last ten years, which thanks to the laws of supply and demand drive up material costs regularly. 

It was interesting to note that site acquisition expenses represented 10.1% of development costs and that the average site area decreased 15% as demand for good sites increased significantly in metropolitan areas. 

So this trend is not just about senior housing exclusively as the same factors are impacting most asset classes, of course.  It is about making good choices on your sites, your design, and your development team selection to include General Contractors and Operators and to try to do more with less when necessary.  A bit smaller sites, a few less units, and some elevated costs to offset, those who succeed navigating this course will stay ahead of the curve.  To our existing and future clients, we look forward to helping you do just that.

Don Diedrick
Director of Business Development

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