What is your biggest prediction for the seniors housing industry in 2019?
How patient is the capital?
By Talya Nevo-Hacohen
Chief Investment Officer
Sabra Health Care REIT Inc.
I predict that the seniors housing space will continue to attract significant investment capital in 2019 as the sector continues to be viewed as less cyclical than other property types — an appealing attribute for real estate investors in the late stages of an economic recovery.
This will be in stark contrast to the perspective that operators will have in 2019 as they face revenue and labor pressures, which will continue to squeeze operating margins. It remains to be seen how patient this capital will be.
Prioritize the employees
By Terri Cunliffe
President and CEO
Covenant Retirement Communities
There’s no question that the labor market within seniors housing is a big challenge for all organizations. I predict that 2019 will see those within the field continue to make the employee experience the best it can be through building upon culture.
More will be done in regards to benefits, recruiting, retention and training. Ultimately, by making the employee experience a priority, those employees will in turn continue to help make the resident experience their priority as well.
We’ll see more complexity
By Lisa McCracken
Director of Senior Living Research and Development
We will continue to see pressures coming from the skilled nursing side of the business and, consequently, providers will advance growth initiatives largely within independent living. Workforce pressures will remain and consumer expectations will continue to change.
The business is becoming more complex, and we are going to need to be open to partnerships and perhaps formal affiliations to thrive during these dynamic times. With a large number of new investors and owners flocking to seniors housing in recent years, we will need to ensure strong operators. This is a significant opportunity for established organizations considering third-party management services.
Margins will compress
By Alan C. Plush
With new development continuing in most of the country due to an abundance of capital, labor costs and occupancy pressures including rent concessions will result in margin compression and decreased equity returns. Only when this occurs broadly will new development start to slow.
As for labor pressures, it’s hard to see that improving in the next three to five years. The much-hoped-for recovery in early 2019 will likely take until late 2020 at the earliest in markets with few barriers to entry.
As with prior booms, people overestimate the demographic wave and underestimate the impact of technology, and the choices it brings, on the sector. I sense that a correction will be educational to many that are new to the sector.
New operators bring fresh ideas
By Charles Bissell
JLL Capital Markets. Seniors Housing
I believe that 2019 will be the Year of the Operator. The market is increasingly competitive, and operators are faced with a challenging labor market. Investors relatively new to the space are coming to the realization that the quality of the operator they partner with is just as important as the quality of the real estate.
Many new operating companies have formed in recent years, and I expect to see this trend continue in 2019. Many will bring new talent and fresh ideas to our space, which will be of great benefit as the first wave of boomers approaches age 75.
Some failure is coming
By Kevin McMeen
MidCap Financial Services
I believe that 2019 will see the beginning of a shakeout in the industry.
Fundamentals are weak and there will be owners and operators that will buckle under the pressure of slow leasing, rising expenses and rising interest rates.
This combination of challenging trends will create insurmountable obstacles for those operators and ownership groups that do not have the financial wherewithal to meet the challenge.
Safety is top concern
By Paul A. Gordon
Hanson Bridgett LLP
In 2017 and 2018, operators were presented with challenges of a type and on a scale they have never before had to face: Storms in Florida and Texas, fires in California, a series of murders in Texas senior care residences, and the resident who shot firefighters and a bystander at a California senior community.
In 2019, state regulators, industry associations and operators will focus on the development and implementation of policies and practices designed to promote safety, anticipate dangerous and potentially catastrophic events, and increase each community’s capacity to respond to them.
A new emphasis on training of staff and residents in procedures for evacuation or sheltering in place will be necessary. Communities will institute periodic emergency drills. Building security will be re-examined and strengthened. Firearms policies will be reviewed and updated, and active shooter training programs may be offered. For licensed properties, government agencies will create new and more stringent emergency preparedness regulations, and step up enforcement of existing requirements.
Age-restricted on the rise
By Tim Cobb
Seniors Housing & Healthcare – Investment Sales Lead
I believe 2019 will see an explosion of traditional assisted living/independent living owners beginning to partner, buy, develop and operate age restricted lifestyle communities to help mitigate the five- to seven-year timing gap of the impending demographic boom.
New capital enters the fray
By Ben Firestone
Senior Managing Director
Blueprint Healthcare Real Estate Advisors
One of the biggest trends we’ll see emerge in 2019 is new capital entering the space. This will be driven by significant market shifts.
On the seniors housing side, we’ll see demand and absorption beginning to catch up and equilibrate with new supply. On the skilled nursing side, the shift to patient-driven payment model will trigger sale decisions and create opportunity for operators and investors to respond and react.
Our outlook for 2019 is strong, and it remains an exciting time to invest in opportunities in the space.
Development boom will slow
By Clint Malin
Executive Vice President, Chief Investment Officer
LTC Properties Inc.
From an investment perspective, 2019 is going to be interesting. We will start seeing even more opportunity to leverage unsuccessful private equity deals.
Rising interest rates will remain a hot topic. Building will slow, and occupancy will increase. There will be continued focus on optionality, affordability, labor supply and expense, and managed care.
Operators get more sophisticated
By Christian Cummings
Senior Vice President, Asset Management (Seniors Housing)
This year will likely bring the advantage of leading seniors housing operators into even sharper focus.
Notably, sophisticated operators that possess both scale and skill will generate deeper levels of consumer insights resulting in even higher quality of care and market share gains. Ventas’s partnership with leading operators such as Atria, Sunrise and Eclipse position us well in this market context.