Last week NIC published an article by Beth Mace about the California marketplace and it really caught my eye.

By Steve Moran

Last week NIC published an article by Beth Mace about the California marketplace and it really caught my eye. I live in California, have visited hundreds of senior living communities in California and was curious to see if my assessment jived with the NIC data. Much of the data is consistent with how I see the market but there is also some crazy stuff. My thoughts . . . that will make more sense if you read her article first:

  • California has some hot markets . . . San Francisco, San Jose, San Diego. None of them are real surprises, in that they have lots of high income individuals and it is tough to develop in those areas.

  • The first big surprise for me was in Sacramento which is where I live. The incomes are moderate . . . lots of state workers and the development environment, at least by California standards, is relatively positive. I am not sure Sacramento will stay so positive because there are a bunch of new properties that have come on line and several more that are in process . . . but maybe.  

  • Stockton, California, is another big surprise. It is a city that is filled with trouble. Lots of gang and police problems. They were recently on the verge of bankruptcy and yet they have both a high market penetration and a decent level of occupancy.  

  • The next surprise was Modesto. Economically a stronger city than Stockton for sure, but still an agricultural community and yet a high penetration rate and relatively high occupancy.

  • I do know there are some strong CCRCs (Life Plan Communities) in both Stockton and Modesto which may have some impact, though the NIC data suggests not much.

  • The other significant puzzle is that penetration rates are all over the map. In Bakersfield and Riverside you see low penetration and low occupancy. These are markets I would be looking at. Perhaps the operators in those markets are not strong. But it could also be the economics of the marketplace is not strong.  

Other Considerations

There are some things that make this data hard to analyze on the surface (all of which is fairly easy to obtain or infer from the table):

  • It would be nice to know the total population and 75-plus population for each marketplace.

  • It would be nice to know the total inventory in each market area.

  • It would be nice to know how many board and care beds there are in each market.

  • It would be nice to know how many communities there are.

  • NIC does not take into account income when looking at market penetration. So the market penetration for income/asset qualified seniors could make market penetration rates look very different.

The Board & Care Factor

As Beth notes in the article, there are thousands of board & care homes for the elderly in California representing tens of thousands of beds. There is a sense that most are not that great and so they don’t count for much. There may be some truth in that thinking but it is not the whole truth. There are some really amazing small 4-15 resident communities that charge rates that are comparable with high-end enterprise senior living communities.  

They need to be considered by any developer operator.

A final note:  You can get more vital data like this at the NIC Spring Conference that will be held in San Diego, March 22-24, 2017. Registration is not open yet but you can get on the pre-registration list HERE.