Seniors Housing Weekly Update - Recommendations On A Seniors Housing Bubble
December 17, 2013
Recommendations On A Seniors Housing Bubble
Last week, I talked about the possibility of a bubble in seniors housing, and I asked you to let me know your thoughts. While I didn’t hear from every Tom, Dick or Harry, I did hear from a few others. First were some New Year’s resolutions for providers from Jim Moore. Number one was that they should be focusing on organic growth with their existing properties. This would include occupancy enhancement, with the 70%-plus operating margin on census increases above 85% that comes with it. Nothing like a full community to attract new residents! The second was expense reduction, with the significant impact that just a $1.00 per resident day reduction in expenses can have on the bottom line, being careful to balance that while trying to move the needle on census. We also heard from Gary, who agreed that we have to watch the growth of new development, but who pointed out that even though assisted living and memory care development is now 5.2% of existing inventory, 43% of those 10,000 new units are in just five metro markets. This implies that the vast majority of the markets have a long way to go before a bubble grows big enough to pop. We can only hope.