Evolution of the senior housing sector this year and heading into next year has been marked by new product types that are differentiated by rate and service offerings, according to the new Urban Land Institute and PwC Emerging Trends in Real Estate report.
A new generation of residents expects more from senior housing than long-term care in their retirement years, and providers are stepping up to meet their demands, according to the report.
“It is an exciting time in the senior living industry as the sector matures and product offerings become increasingly differentiated. Much like the hotel industry, with offerings from Motel 6 to the Ritz-Carlton, operators, developers, and capital providers are increasingly segmenting the senior housing market by both price point and service offerings,” the researchers wrote. “And, of course, the traditional senior housing product remains, with a price point that falls between the two and offers a value proposition of security, socialization, engagement, room and board, care coordination and lifestyle.”
Wellness programs increasingly are making their way into senior housing offerings to help providers stay competitive, the authors said, noting that older Americans looking for the proverbial “fountain of youth” value wellness programming.
“In addition, the movement of many operators to incorporate wellness programs into their offerings has the potential to be a significant competitive advantage as potential residents seek communities that hold promise to improve the quality and length of their lives,” they wrote.
Senior living slowly has been gaining recognition as part of the continuum of care, as providers have the wherewithal to manage chronic illnesses and participate in residents’ overall health needs, according to the report..
“Once senior housing is fully recognized as part of the healthcare continuum, senior housing operators will be able to participate in the revenue streams associated with a capitated risk-sharing model of care,” the authors said.
The number of senior housing units under construction and increased demand have created a tailwind for occupancy. In the second quarter, senior living stabilized occupancy saw a gain for the fifth consecutive quarter, according to the National Investment Center for Seniors Housing & Care intra-quarterly snapshot. Stabilized occupancy had risen 0.3 percentage points to 83.7% in August, according to the data. Occupancy for properties that primarily are independent living was 85.7%, with occupancy for majority assisted living properties at 81.4% for the 31 NIC MAP primary markets.
According to the Emerging Trends report, senior living will be affected by several factors in the future, including the broad performance of the US economy, consumer confidence, rate of inflation and federal interest rates. The slowing pace of sales for residential housing could also factor in, because the pace of residential housing is slowing. The good news, according to the report, is that pent-up demand for senior living settings has been strong during the second half of this year, and a moderate amount of development is underway.
The report noted that the sector also is being affected by new competition in the form of properties opening since the pandemic began, as well as local market area demand and supply pressures.
Demographics favor the senior housing sector, according to the report, which noted that the number of older adults aged 82 or more years is rising “exponentially.”
“Looking ahead, many reasons exist to be optimistic about the outlook for senior housing, but the path forward may be a bit bumpy due to the prevailing winds in the broader economy,” they wrote. “Inventory will continue to expand, although at a reduced pace in the near term, which should act as a tailwind for occupancy improvement.”
