In the first half of the year, long-term care construction volume in the public sector outpaced the private sector, with labor shortages and material costs still keeping prices up.

According to the Senior Living Construction Costs Brief for Summer 2024 released on Tuesday, public sector construction volume grew 11% compared to the same period last year. 

That said, the private sector is expected to see gains in volume.

“We are seeing optimism in the private sector as hopes for a federal rate cut become more likely by year end,” analysts said.

For those cities with a city index of 100 – cities like New Jersey have an index of 113.4 – skilled nursing construction costs per square foot ranged from $314 to $369 at the mid-level, and $392 to $499 for high-level facilities.

For cities such as Knoxville, Tenn., with a city index of 85.3, construction costs per square foot for skilled nursing facilities ranged from $268 to $315 at the mid-level.

Currently, major indices are trending lower, and contractor margins are experiencing modest compression as subcontractors work to address their backlogs, the brief noted.

Meanwhile, composite pricing for materials has risen approximately 4.5% annually, while labor costs have increased between 4% and 5%. Also, the industry continues to face labor shortages, with construction unemployment at 3.3%

“Labor shortages continue to plague the industry,” analysts noted. “It’s difficult for many firms to find quality trade workers. We anticipate the overall escalation rate for the next 12 months to be in the 4-5% range.”

The brief was prepared for the American Seniors Housing Association (ASHA).