Rebounding occupancy, increasing investment and consolidation activity, and the furthering of integrated healthcare models were among the trends senior living experts discussed during an Argentum webinar.
Using Argentum’s 2024 Largest 150 Providers Report as the backdrop for the conversation, a panel of experts looked at the major market changes affecting the senior living industry and how operators must adapt their businesses to meet demographic shifts, evolving consumer preferences and innovation to stay relevant.
Across the board, the National Investment Center for Seniors Housing & Care has reported 12 consecutive quarters of occupancy increases in senior living, with all major markets seeing occupancy greater than 80%, according to Lisa McCracken, NIC’s head of research and analytics. And she said she anticipates that amount will jump to 13 consecutive quarters of occupancy gains once third-quarter data are reported next month.
“We are seeing record levels of absorption in that occupancy group at a pretty rapid clip,” McCracken said. “We feel like we are in a phase where we’re past that pent-up demand from COVID, but we’re definitely seeing demographic demand.”
Commonwealth Senior Living President and CEO Earl Parker said that although the pace of move-ins at his company remains strong, occupancy growth actually has slowed due to move-outs increasing at the same or at a higher pace than move-ins. He attributes that occurrence to several factors but said he generally is seeing residents move in with higher needs, which leads to shorter lengths of stay.
“We’re having to work harder to drive more move-ins to make up for those losses on the back side,” Parker said, adding that he expects the trend of later resident move-ins and new residents having increased frailty to continue.
Construction starts continue to lag
Looking at inventory growth and construction starts, McCracken said that the data shows it is “pretty suppressed” compared with the previous 10 years. The difference now, she said, is that demographic growth is greater than inventory growth.
The development cycle also has lengthened, McCracken said. Initially, development delays were due to pandemic supply chain issues, she said, adding anecdotally that she is hearing about industry challenges related to approvals and other aspects of the development process taking longer than in the past.
Given Wednesday’s announcement from the Federal Reserve that it is lowering interest rates by half a point, McCracken predicted that it is going to take three years and multiple rate cuts before the effects begin to show up meaningfully in the development market.
Challenged margins
Margins are affected by inflation and labor costs, Parker said, adding that it still is a question whether margins will return to pre-COVID levels. McCracken added that although wages and labor costs have stabilized, they haven’t decreased, so they represent continuing challenges for operators.
Rather than trying to improve margins through rate increases, Parker said, Commonwealth is working to ensure that it is providing levels of care and support that are appropriate to the higher needs that new residents have. That work also involves charging for those services and “not giving away the care,” he said.
McCracken added that NIC tracks discounts and incentives and has observed more of both in independent living compared with assisted living.
According to NIC, 45% of properties in its primary and secondary markets are 25 years or older, and there has been very little reinvestment in them over time. Although some of the properties’ operators might be shielded due to a lack of competition in their markets, McCracken said, the viability of those properties is going to be challenged into the future, and the industry will need to deal with such matters.
McCracken cautioned that senior living operators should not get too comfortable assuming that the baby boomer demographic will carry them. That group is on senior living’s doorstep, she said, but its members are different from current residents. Although boomers might have the ability to move into private-pay communities, they expect more value for their dollar, McCracken said.
“We have to work on that,” she said. “We need to be much smarter with the next growth cycle, reinvesting what we have. We have to work to meet the needs of those customers.”
The role of integrated care models
With a higher-needs population moving into senior living communities, Parker said, Commonwealth is working to better understand each resident’s needs, preferences, wants and goals. Doing so means delivering a value proposition that wraps care and services into housing, he added.
McCracken said that the senior living industry has the potential to go above and beyond what it’s been doing now and really help extend residents’ quality of life.
“It’s a very unique situation when you have the ability to observe someone every single day and really try to say where can we implement some prevention, monitoring measures, help them extend their life,” McCracken said, pointing to research NIC undertook with NORC a the University of Chicago on longevity and health outcomes.
