Skilled Nursing Construction Costs Creep Up Amid Tariffs, Labor Shortages

The cost to build a new skilled nursing facility crept up by a little under 3% from last summer amid tariffs and other pressures.

A typical mid-level skilled nursing facility will cost between $207 and $242 per square foot to build new, according to the winter 2019 senior living construction report from Iowa-based general contractor The Weitz Company.

Weitz defines “mid-level” as a wood-framed structure with standard fixtures; for a “high-level” steel or concrete facility with luxury amenities, the cost ranges from $261 to $333 per square foot, Weitz reported.

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That’s a jump from summer 2018, when the company pegged costs at $202 to $236 per square foot for mid-level buildings and $255 to $326 for higher-level construction.

Weitz blamed federal tariffs on raw materials, which in turn fueled inflation, and a persistent labor shortage in the construction industry.

“The labor shortage continues to be an issue in most markets with an aging workforce and fewer young people joining the trades,” the company observed in its summer 2018 analysis, with no change in the landscape since.

Skilled nursing facilities remain among the highest-cost properties to build in the senior housing and care space. For reference, even high-level independent living buildings top out at $236 per square foot in the winter 2019 analysis, with only independent-living commons developments exceeding the maximum for SNF construction at $408 per square foot.

New development in the skilled nursing space has been relatively rare in recent years, with most of the activity coming from “medical resort”-style rehab facilities that cater to younger residents who can choose their post-surgery site of care.

“You are seeing newer, specialized facilities built for that purpose,” Capital One Healthcare Real Estate managing director Jim Seymour told SNN last month. “You’re not seeing new development going toward the longer-term patient. Most of the new money seems to be going toward the high-rehab type facility.”

Weitz points out that its construction data does not include site costs, with the exact figures varying based on individual market conditions. The firm develops a “city index” for each location: For instance, Wichita, Kan. has an index of 85.6, giving it a SNF construction cost range of $117 to $207 per square foot. Philadelphia, with an index of 115.2, would have higher costs per square foot.

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