In the first half of the year, the cost of building long-term care facilities in the public sector exceeded that of the private sector, with labor shortages and material costs continuing to keep prices high.

According to the Summer 2024 Senior Living Construction Costs Report released Tuesday, public sector construction costs increased 11% compared to the same period last year.

However, costs in the private sector are likely to fall.

“We see optimism in the private sector as hopes of a federal interest rate cut by year-end become more likely,” analysts said.

In cities with a city index of 100—for example, New Jersey, where the index is 113.4—the cost of building a nursing facility per square foot ranged from $314 to $369 for mid-range facilities to $392 to $499 for high-end facilities.

In cities like Knoxville, Tennessee, with a city index of 85.3, construction costs per square foot for nursing homes were in the mid-range of $268 to $315.

Currently, major indices are trending downward and contractor margins are facing a slight decline as subcontractors work to clear their backlogs, the report said.

Meanwhile, material prices have risen by around 4.5% annually, while labor costs have increased by between 4 and 5%. In addition, the industry continues to suffer from a labor shortage, with unemployment in the construction industry at 3.3%.

“Labor shortages continue to plague the industry,” analysts noted. “Many companies are struggling to find qualified workers. We expect the overall rate of increase to be in the range of 4 to 5 percent over the next 12 months.”

The contract was created for the American Seniors Housing Association (ASHA).