Members of Berkadia Seniors Housing & Healthcare recently attended the 2024 Spring NIC Conference in Dallas, Texas. The conference’s sessions and speakers provided valuable insights into seniors housing as it stands today and the industry’s outlook for the near future.
Industry Sentiment Survey
Over 1,800 attendees were asked about the outlook for seniors housing & healthcare in 2024, with 80 percent responding either extremely positive or somewhat positive.
When asked to rate their outlooks on a scale of one to five, with one being extremely negative and five being extremely positive, the following results were recorded:
Product & Service Companies: 4.34
Transactional Services: 4.23
Investors: 4.05
Developers: 3.94
Debt Providers: 3.85
Overall: 4.11
With the cost of capital at its highest point in recent memory, along with the limited access to that capital, we do not find the results of this survey all that surprising.
Seniors Housing Extends Lifespan
According to researchers from NORC at the University of Chicago, older adults that reside in senior housing communities live longer and have a better quality of life than their counterparts who receive at home care. During the two-year period following move-in, residents across the senior housing care continuum receive more healthcare services, including preventative and rehabilitation care.
Expanding Access to Seniors Housing
Affordability is still a barrier to entry for many seniors looking to enter a seniors housing community. Roughly 30 percent of homeowners age 80+ have a mortgage and 11.2 million senior households are housing burdened, which according to the United States Department of Housing and Urban Development (HUD) is defined as rent or mortgage costs exceeding 30 percent of household income.
To help lower- and middle-income seniors take advantage of the benefits of transitioning to senior housing, the Centers for Medicare & Medicaid Services (CMS) is collaborating with the seniors housing sector to expand the agency’s definition of care and other initiatives that could potentially expand Medicare and Medicaid payments into the space.
Retail Investing in Healthcare
With companies like Kroger and Amazon investing in the healthcare space, there is increased interest in partnering with seniors housing operators to have their products available to residents.
One recent example is Amazon’s acquisition of One Medical, which gives the company unique access to baby boomers with disposable income who are looking for products and services that can track and improve quality of health.
Capital Markets
While financing remains an issue, we are seeing an uptick in bid activity for those with cash on hand, particularly among real estate investment trusts (REITs). Interest among Class A stabilized, cash flowing assets grew during the first three months of this year. There is still plenty of dry powder on the sidelines as elevated interest rates have slowed financing across the commercial real estate spectrum.
Investors and lenders must contend with the expected but not certain interest rate cuts by the Federal Reserve in the second half of 2024, as well as the upcoming presidential election which will continue to keep the capital markets turbulent.