In developing senior housing projects there are common pitfalls to avoid, and Cambridge Realty Capital is an expert on how to avoid these seemingly easy traps.
Senior housing can mix industrial, commercial, and residential designs within a single project to attract all types of backgrounds of senior residents, and navigating the process from development to completion can be daunting. When it seems like virtually every construction project is plagued with breaches of promises by contractors, whether it’s late delivery or change orders, a developer must have a cohesive team to properly finish the project.
This means having a reliable team may trump having the most “talented” team. The most reliable indicator is that a contractor has built the product before, so building senior housing should be done with a contractor that knows senior housing construction, with an added bonus if they have also worked on buildings in the healthcare industry at large, like nursing homes or hospitals.
Setting Expectations at the Get-go
Some questions developers in senior housing would ask before they start their senior housing project include:
- What are my holding expectations for this project?
- More specifically, is this a long-term investment project? Or is this something I intend to reposition as an existing asset (i.e. conversion from apartments to senior housing) and then plan to sell?
- What type of equipment shall I invest in as capital expenditures?
- What kind of resident technology needs will my project outfit for the healthcare component to ensure resident amenities are at their best?
- What kind of municipal designations can I get with this senior residential facility? For example, will this be a nonprofit, where tax exemptions would apply, or a specially licensed nursing care component?
Gearing such preferences at the beginning sets the temperature for developer and investor expectations and trickles down to the construction work. This also carries into how to communicate to the municipal government and their constraints, because the list of expectations grows as the developer incorporates governmental and zoning concerns.
This is emphasized for ground-up development of senior care facilities, because building on such large spans of real estate to afford the proper amount of space for residential units will most certainly also come with the additional costs of exposure to environmental risks, whether due to tornados, floodzones — especially those in hurricane-prone areas of Florida — or in larger spans of real estate where protective easements may be applied due to ecosystems and wildlife. And don’t forget special interest groups that may resist the project due to the environmental impacts.
As such, developers must be poised and ready to mitigate their risks. During the selection of bids to provide material and construction costs, one should be prepared to select the proper vendor who has experience working on senior housing facilities. The novice investor knows that choosing the lowest bid during the selection phase can lead to later expansion of the work and cost overruns. Another helpful hint for developers: construction insurance, or general liability insurance, can be an indicator of the quality of the contractor as well. The higher the insurance, that may (but not necessarily) mean there has been concern for risks with respect to the quality of construction work.
Across the board, it is irrefutable that market studies will provide valuable insight into demand. Undoubtedly one of the most expensive considerations in construction development may be changing floorplan designs due to unexpected or unanticipated controls on space. Research will aid in determining exactly how many senior clients may be interested in your new housing. Talk to Cambridge Realty Capital today, and see how difficult questions can be answered to take these and other concerns away from the developer in order to ensure both exceptional and profitable senior housing projects.