Builder workforce shortage driving SNF construction costs higher

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Inflation caused by a workforce shortage continues to drive up construction costs for both high-end and middle-range skilled nursing facilities, according to a brief published last week.

Prepared for the American Seniors Housing Association by contractor The Weitz Company, the brief showed that some subcontractors have resorted to adding contingency dollars to projects to cover overtime and other pay incentives to retain workers and keep projects on schedule. Between 70% and 80% of contractors reported having issues finding qualified labor to support their projects.

As a result, prices for skilled nursing projects in both the mid-level and high-level ranges have increased. Mid-level facilities, which are typically made with wood frames and standard amenities and finishes, clocked in at an average range of $189 to $224 per square foot. That's compared to a range of $184 to $218 reported in early 2016.

High-level skilled nursing facility projects, which use steel or concrete construction with high-end finishes and luxury amenities, cost a range of $241 to $311 per square foot, compared to $324 to $302 last year. Price ranges vary based on location.

Construction costs across the senior living spectrum — including assisted and independent living — are projected to increase 5% to 6% over the coming year, according to the brief.