Because of the country’s changing demographics, an improving economy, and low interest rates, the senior housing industry is seeing a wave of construction activity, occupancy gains, mergers and acquisitions, and other activity during the last few years. As the industry continues to grow and evolve, senior housing participants are doing their best to analyze where new opportunities will arise and what areas might present challenges in the future that they need to prepare for now.
Future Opportunities in Senior Housing
For earlier generations of seniors, senior housing was a place where people went to when they could no longer care for themselves. However, the care provided at many of these facilities was not very extensive, and the activities that they offered to keep seniors’ minds fresh and engaged were scarce.
That is no longer the case today. Today’s senior housing facilities provide numerous care services, often by highly trained nurses and other medical professionals, and many of them also have activities directors on staff that oversee and administer a variety of events and activities for their residents to take advantage of. This is especially important because researchers have found that, in addition to providing physical benefits, activities also provide emotional and intellectual benefits that are very important as well. Going forward, senior housing communities will look for ways to offer activities that take advantage of new technologies, such as video games that respond to someone’s movements, and the many different applications that can be accessed with smart phones and tablets, which can help keep seniors engaged and mentally sharp as well.
On the care side, a number of government and private organizations are researching ways to cure, or at least control dementia, and as they get further along in their research, new medications and therapies are expected to be developed that will have applications for senior housing communities and their residents. For example, to the extent dementia can be controlled better with new medications, the demand for assisted living facilities might begin to outpace the demand for memory care facilities. Also, regulations governing staffing for memory care facilities may undergo revision if newer medications are able to reduce the amount of care that dementia residents need.
Business Challenges
On the business side of senior housing, industry participants will need to grapple with new legislation and higher interest rates in the future. With respect to legislation, the primary law that the industry is concerned with is the Affordable Care Act and its employer mandate, which can potentially raise operating costs and lower net operating income for those providers that are affected by it. Lower Medicare reimbursement rates for skilled nursing facilities is also a concern to many in the industry, as the federal government continues to look for ways to reduce its annual deficit and get entitlement spending on a more fiscally sustainable path. Lastly, the Federal Reserve is expected to increase interest rates sometime next year, and this will affect capitalization rates, valuations, and M&A activity in the senior housing space.
As senior housing participants prepare for the challenges and opportunities that face the industry, those that are interested in taking advantage of today’s low interest rates to obtain capital for growth or other needs should continue to look to the Chicago-based financing firm Cambridge Realty Capital for assistance with financing acquisitions,sale/leasebacks,joint ventures, and other transactions as well.
