When it comes to the future of new development in Senior Living – do you know where you stand?

By Steve Moran

Capital One, a Senior Housing Forum Partner, just released a new survey on how senior living professionals view opportunities in the marketplace. The results are a bit of a conundrum:

  • 35 percent of those surveyed indicated that overbuilding is their top concern

  • 41 percent of those surveyed felt that new development offered the greatest investment opportunities  

It is like that survey done a number of years ago that showed 93 percent of all drivers considered themselves to be above average drivers.

Will There Be a Stumble?

It seems that while developers are generally concerned with over-development, when they look at their own projects they believe they are an exception.  

It is also possible that there is a belief that there are two types of senior living investors – the newcomers and the experienced developers. In theory, the experienced developers have the familiarity to not have any fails, but some are concerned that new entrants may not be practiced enough in this specific expertise to pick the right marketplace and develop the right product.  

There is probably some truth in this; however, as I see it, over the last few years it has been almost impossible to develop a project that wasn’t successful. It won’t be until the waters get a little rough that we know if those developers/operators were brilliant or lucky.

The one clear advantage that experienced owners have is that ownership of multiple properties provides them both an equity and cash flow cushion that may not be available to new operators.

Survey Highlights

  • 41 percent of senior housing professionals expect new development to offer the greatest investment opportunities in the coming year, followed by repositioning of older properties (26 percent)

  • 35 percent of those surveyed identified potential overbuilding as their top concern

  • 19 percent saw the impact of higher interest rates as their top industry concern

  • 20 percent see the influx of new capital as a potential threat to the industry

  • Two issues landed at 10 percent on the concern scale:

    • State-specific rate and operating environments

    • The lack of affordable senior housing

  • Most of those surveyed (60 percent) expect the pace of mergers and acquisitions activity to increase in the next 12 months, with 29 percent expecting it to stay flat

Survey Details: Capital One conducted this survey at the IMN Real Estate Private Equity Forum on Senior Housing in Los Angeles, California, on September 17-18, 2015.

You can download the full press release here.