Seniors Housing Development Costs & Returns Rise in 2019

Seniors housing development costs rose by 6.4% in 2019, while the average return rose to 9.5%. Increased labor costs, coupled with land costs and, to a lesser extent, materials costs, all contributed to the rise.

Seniors housing development costs likely will rise modestly in 2020, even in a continued climate of somewhat reduced development activity.

 

Total costs for a seniors housing development rose by 6.4% in 2019 to an average of $317 per sq. ft.

US Seniors Housing-Figure 1

Source: CBRE Valuation & Advisory Services and CBRE Research, Q4 2019.

Hard costs represented 66.8% of total development costs, followed by soft costs at 19.5% and site costs at 10.1%.

US Seniors Housing-Figure 2

Source: CBRE Valuation & Advisory Services and CBRE Research, Q4 2019.

Average returns (stabilized net operating income as a percentage of overall development costs) rose to 9.5%, up 60 basis points in 2019.

US Seniors Housing-Figure 7

Source: CBRE Valuation & Advisory Services and CBRE Research, Q4 2019.

Development cost metrics are vitally important for parties involved in the development process. Explore further analysis of development pricing in CBRE’s annual report.

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The CBRE Summer 2019 Seniors Housing & Care Investor Survey includes perspectives from the most influential seniors housing investors, developers, lenders and brokers throughout the United StatesThe CBRE Summer 2019 Seniors Housing & Care Investor Survey includes perspectives from the most influential seniors housing investors, developers, lenders and brokers throughout the United States
June 12, 2019