Are we telling ourselves the truth or just what we want to hear?
By Steve Moran
I feel like I have been kind of a negative nervous nellie this last few weeks so I want to acknowledge that maybe this is true. But then again . . . .
From Senior Housing News – Survey: Investors Flock to Senior Housing, Dismiss Oversupply Worries
From National Real Estate Investor (NREI) – Exclusive Research: Outlook for Senior Housing Sector Remains Bullish
Over roughly a six week period NREI and NIC emailed members of their two databases asking them to participate in an online survey about the state of senior living. They received 182 responses the result of which was the article from National Real Estate Investor. Here is some of what they discovered:
“The greatest number of units came online in the second quarter of this year compared to any other quarter in the past six years.”
Most survey respondents believe we will see an increasing number of construction starts in the coming 12 months.
“The majority of respondents also believe that the new supply remains in check with demand.”
“Nearly two-thirds of respondents do not think that the construction will result in overbuilding.”
“Some markets saw a spike in activity at a rate of more than 15 percent in expansion relative to existing inventory, including San Antonio, Salt Lake City, Austin, Houston and Sacramento.”
Investors “remain eager” to acquire new senior living assets.
More buyers are entering the market pushing prices higher.
“Competition is fierce,” among capital providers.
“Despite the new supply coming online in terms of new construction, respondents are confident that the underlying fundamentals remain strong. Seventy two percent believe that occupancies will rise, while 16 percent predict a decline and 14 percent believe occupancies will remain the same.”
“Respondents also are optimistic that rents will continue to rise over the next 12 months.
Getting The Answers We Want to Hear
There is a lot of interesting information in this survey and it is a must read for the industry. That being said we need to be so so careful about putting too much faith in our own optimism. The survey went out and asked a bunch of people who make their living buying, selling and developing senior living communities how they see the future of senior living.
It seems improbable to believe that this group of people who are deeply embedded and invested in the today frothiness of senior living — people who are buying, selling and developing — would be anything other than enthusiastic.
. . . Otherwise they would be sitting on the sidelines or out of the sector all together.
Thinking About It
Three years ago I interviewed a bunch of senior living leaders post NIC and the all but universal view was that it was impossible to build too many memory care units. Today it is clear that is not true. I am far from pessimistic about the industry or new opportunities. Here’s how I view it:
Big and small companies will see some localized significant pain. This is not a future thing, it is already happening, but will get worse.
We will see some small and medium-sized players fail.
That failure will mean opportunity for others.
We will see some older stock either taken out of the marketplace or turned into blue collar senior living communities.
Great developers will continue to beat the market, big time.
The Bottom Line
We will see some sifting in the marketplace. This sifting will mean real pain for residents, families and teams. It will also result in a stronger industry.
How do you see it? Take my one question survey.