With the crest of the Silver Tsunami ostensibly another 10 years away, a joint report by Senior Housing News and Plante Moran of Chicago (The Five-Year Senior Housing Development Forecast) suggests that senior housing starts will slow down in the next five years before they pick up steam closer to the 10-year mark. It’s all about supply and demand. It suggests that the supply of available senior housing is relatively equal to the demand. Of course, as demand grows in the next decade, it is expected that developers will be eager to address the void in senior housing. However, none of this worries Cambridge Realty Capital President Jeffrey Davis. He sees things very differently. “We’re very confident about the upcoming year,” he stated.

According to the study, 20 percent of the current supply of senior housing on the market was introduced in the last five years as the US economy bounced back from the 2009 recession. It filled the gaps that had emerged prior to 2009 and caught up (and in some areas outpaced) the demand. The study also suggested that rising construction costs (both labor and materials) and the prospect of rising interest rates may also be factors that will stunt construction starts, This will affect not only senior housing, but the construction industry in general

The labor shortage afflicting the senior living industry may also play a role in the prediction of a slowdown. Facilities can’t be built where there isn’t a strong enough labor market to staff them. Additionally, some areas are still experiencing a shortage of labor in the construction industry, both skilled and unskilled, which may also play a small role.

While new construction may be a little slow, other experts are predicting a surge in renovations to existing senior housing. They attribute this to two interrelated factors: aging facilities and the highly competitive employee recruiting and retention market. Dated facilities are simply not enjoyable places to work. With so many new employers offering similar pay in newer, more modern facilities, it makes it even more difficult for senior living facilities to compete for staff. Renovating and refurbishing dated spaces may give senior facility operators an edge when it comes to recruiting and retaining employees. Of course, more appealing spaces will also benefit residents, as well as potentially attract new residents and possibly even new investments.

The staff at Cambridge are nonplussed about the prediction of sluggish construction. In fact, Davis believes that Cambridge will see more new construction loan applications coming across his desk in 2019. His confident outlook has a lot to do with mainstream banks. “Conventional banks are increasingly tightening their purse strings, at least when it comes to senior housing. Rising construction costs, marketplace labor shortages, Medicare and Medicaid regulations and other risk factors affecting senior living are causing conventional lenders to shy away from the industry almost entirely,” he asserted.

These factors don’t faze Cambridge at all. Having worked exclusively within the senior living industry, it has fine-tuned its skill to precision and developed an extensive network of lenders, buyers, sellers and experts to ensure that senior living borrowers will always be able to get the funding they need, whether a conventional or HUD loan. Borrowers who might have previously sought a loan from a conventional lender will increasingly look to boutique firms like Cambridge to fill that gap, and Cambridge is ready to meet the needs of those borrowers.



Recent Posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Start typing and press Enter to search