Strong signs of a weak market . . . .

By Steve Moran

On August 11 The Wall Street Journal published a reality check article titled New Senior Housing Raises Concerns Supply Will Outpace Demand From Baby BoomersHere are the highlights:

  • Occupancy rate for all senior housing in 31 major markets fell this spring for the second consecutive quarter.

  • Shares of big U.S. companies that have a significant stake in senior housing have already tumbled this year as investors fret over rising interest rates.

    • Health Care REIT Inc.’s stock is down 11%

    • HCP Inc. has shed 14%

    • Brookdale Senior Living Inc. is down 20% through Monday’s close

  • The pace of new construction continues unabated.

  • The occupancy rate for all senior housing in 31 major markets fell this spring for the second consecutive quarter (NIC data).

  • Some large marketplaces including Dallas, Atlanta and Chicago have new units under construction that will increase the inventory by more than 10%.  

While not in WSJ article the July 2015 NIC Insider Newsletter suggests operators and capital providers should be prepared to call 89% stabilized occupancy.   

Will 89% be the new normal for stabilized occupancy?

Instability Bullet Points

Instability always represents impending potential disaster for slow moving organizations and leaders.  

Instability always . . . or almost always, represents huge opportunities for nimble creative companies and leaders.   Here is what it might look like:

  • There will be some significant and painful “workout” situations in the industry that will damage the reputation of the industry and hurt team members and residents.

  • Because of the weaker overall market, some operators will figure out better, smarter, more effective ways to serve residents, families and teams.

  • The counter-intuitive rent-roll growth in spite of declining occupancies will stall out.

  • There will continue to be successful high-end and low-end development.  

  • The middle market operators will need to figure out how to differentiate their product.

  • The successful operators will figure out how to actually work every single lead they receive.

The Bottom Line Good News

The bottom line is that we will see some crashes and they will be painful. I am hopeful they will be isolated enough that we will not see further regulation at least at the national level. Now for the good news:

  • We will see new better products.  

  • We will see a push to figure how to provide options that appeal to the 90% who are today saying no to senior living.  

  • We will see smart operators figure out how to create more homelike settings and, at the same time, create life enrichment programs that are better than and offer more meaning than a beanbag toss or bingo for candy bars.

  • We will finally get better at telling our story.

It will be painful, fun and exciting.

Text Box: Will 89% be the new normal for stabilized occupancy?