Rising Costs Make Pre-Construction Planning More Essential in Senior Housing
Value engineering is an accepted inevitability in construction, and it’s become increasingly important as construction costs have been on the rise in senior living. But while smart value engineering will identify the best ways to cut costs without sacrificing quality, too much value engineering can compromise the vision and integrity of a project, and cause a developer to deliver a building that may be practically obsolete upon arrival.
Veteran senior housing developers and operators recognize that a thorough, detailed pre-construction process can minimize the need for value engineering before the foundation of a building is laid, particularly since senior housing development presents its own unique challenges, Jim Moore, President of Moore Diversified Services, a senior living and health care consultancy firm in Ft. Worth, Texas, told Senior Housing News.
“The design features (for senior housing) are much more complex than most conventional real estate,” Moore said. “It falls into three primary areas: living units, common space and back-of-the-house space which contains storage, commercial kitchens and other amenities.”
“When building another product type, like a self-storage or a retail building, you’re building a box and it’s a commoditized process,” Kaplan said. “The challenge with pre-construction in senior housing early on is to get an indication of pricing from general contractors (GCs), and then do an apples-to-apples comparison.”
Lock in pricing, labor ASAP
The current construction boom period is facing growing pressures from a tight construction labor market and rising materials costs. A February report from the Cato Institute revealed the unemployment rate in the construction industry is at its lowest since 2000. The tight labor market is creating problems for GCs, and some delays for projects, when it comes to subcontracting for specific materials and services, according to Joe Pecoraro, Project Executive for Chicago-based construction services firm Skender.
“Subcontractors are being extremely selective as to what jobs they’ll accept and are only committing to projects where they have good relationships with GCs,” he told SHN.
Rising materials costs are causing suppliers to pressure developers and GCs to lock in the lowest price quotes as soon as possible. Pecoraro, who specializes in multifamily and senior housing for Skender, said he has had suppliers increase their quotes for materials at least a half-dozen times in recent months.