By Steve Moran
This is the first of my weekly blogs about the Senior Housing Industry.
Shortly after graduating from college I stumbled across the concept of assisted living and spent most of the next decade exploring the senior housing marketplace as a developer, manager, and vendor. I was then offered a very lucrative position in Silicon Valley that was too tempting to resist. I arrived just in time to witness the dot com/tech bubble burst of 2001, an event exacerbated by the 9/11 terrorist attacks. Since the moment I arrived in Silicon Valley, I longed to get back to my roots. Finally, I am here. This weekly blog will focus on contemporary trends, ideas, and problems in the senior housing marketplace.
It seems the best starting place is to tackle the question: Does senior housing represent an opportunity or a sow’s ear?
Senior housing in various forms has been around for decades. But as entrepreneurs began to look at the baby boomer demographics paired with changing family dynamics, they came to the conclusion that there was money to be made and this segment of long-term care began to accelerate and innovate. Developers began to pay more attention to quality of life enhancements and to explore ways they could increase value and, as a result, improve margins.
In spite of the rapid proliferation of new communities that include independent living, assisted living, and skilled nursing, many opportunities remain for careful, creative, innovative, and bold developers and managers.
Understanding the Market
Having a thorough understanding of the local marketplace is key to success. As a first pass exercise, a developer needs to do a brutal assessment of the raw numbers.
- What is the ratio of living units to demand?
- What is the current vacancy rate?
- Are there other projects on the drawing board or under construction?
If there is a high vacancy rate, developers should proceed with caution. Yet, even in this situation, vacancies may be an indicator of lack of quality or ambiance. Which still offers a substantial opportunity.
Financing continues to present a big challenge for many developers. It does not appear that lenders are particularly shying away from senior housing. But, senior housing is a victim of the shortage of money and poor economic conditions. This pressure seems to be easing and I am seeing many new construction projects in progress.
Finally, finding just the right executive director who will create the right culture makes all the difference in the world. The right ED will motivate and shape the rest of the team. The team attitude will then cascade to the residents, their families, and prospects.
While there will continue to be failures, the real lesson here is that when developers do a great job of strategically planning, marketing, and managing their new communities, those communities will have happy staff, contented residents and families, and make a great return on the investment.