Press "Enter" to skip to content

Senior Living 2023 Outlook: Opportunity Ahead, But No Short-Term Fixes

In the long-term, senior living leaders are optimistic about the industry’s prospects. But they see plenty of challenges left to conquer in the short-term relating to staffing and other top industry issues.

Those were the findings of the latest Senior Living Industry Outlook from Senior Housing News in partnership with Lument. The survey, released this week, reflects the hopes and fears of the year ahead of 224 representatives of senior housing and care organizations.

A total of 79% of the respondents indicated that their outlook for the industry was “somewhat positive or very positive,” with the majority forecasting national occupancy rate increases in every category over the next 12 months. Half of respondents said they believe the industry will rebound to pre-Covid occupancy levels in the first or second half of 2023.

Graphic Courtesy of SHN / Lument

But staffing remains a key issue operators have yet to fully tackle, while rising expenses push some communities toward tough realities.

While interest rates remain high and may further increase this year, 2023 may bring more mergers and acquisitions in senior living as opportunities arise. Respondents said interest rates would continue to play a significant role in their business strategy for the year ahead.

Casey Moore, who is managing director for Lument, said this year’s findings are “somewhat more conservative” compared to past polls.

“That would seem to indicate that participants remain committed but recognize that challenges facing the industry are not subject to any short-term fixes,” Moore told Senior Housing News.

Staffing remains a challenge, occupancy growth ahead

Sixty-two percent of participants said staffing will be the number one issue facing operators this year, and 78% believe that staffing will have the greatest impact expenses in the next 12 months. While staffing issues may not be as dire as they were two years ago at the start of the Covid-19 pandemic, operators believe they must get creative to retain and engage staff.

Wage growth, coupled with agency labor costs and overall rising expenses, have forced operators to raise rates and that wage growth has led to margin compression. That squeeze on NOI led to rising rates to narrow the gap, with some communities reporting 8% to 10% resident rate increases last year.

On the flip side, questions remain about how long residents can actually sustain, and accept, such steep increases.

“We are watching this closely to determine the impact on the underwriting of specific transactions as well as whether this is a long-term trend that will require a permanent reset of operating margin expectations,” Moore said.

Fifty-nine percent of respondents said they felt staffing pressures would ease in 2023 or 2024, with 42% estimating the labor headwinds wouldn’t die down beyond 2024.

Second to staffing, 17% of respondents identified occupancy as the second biggest pain point. But that’s contrasted with the industry’s rebound in census over the last three years.

Well over one-third of respondents (40%) said they anticipated recovery of pre-pandemic occupancy to take place in 2024 followed by 38% in the second half of this year and 12% estimating occupancy will rebound in the first half of the year.

Ten percent of respondents were more pessimistic, estimating occupancy would not fully recover until 2025 or beyond.

More than three-quarters of respondents (79%) believe that memory care occupancy will rebound in 2023, reflecting slightly more optimism when compared to AL (74%), active adult (69%) and IL (64%). Confidence for occupancy gains among CCRCs and within nursing were more muted though, as 38% of respondents said CCRC and nursing occupancy would remain the same in the year ahead.

Opportunities for M&A, path for growth ahead

Nearly half of qualified respondents said their organizations planned to buy senior housing assets this year, and that trend has already been seen this year, albeit at a slower investment rate than last year. While the boon on active adult optimism continues, so too will the appetite for AL and IL investment.

48% of respondents said they expected to buy; 41% responded that their firms would hold and just 11% said they would sell senior living assets in the next 12 months.

Active adult investment out-paced other sectors as 31% of respondents said they would invest in the care type followed by AL at 23% and IL at 20%, the survey found, as contrasted with 2022 that found both AL and IL in front of active adult in terms of future investment, past survey results show.

Graphic Courtesy of SHN / Lument

Private equity’s entrance into senior living will continue, building off a strong year for private equity and venture capital investment in the industry. Thirty-nine percent of respondents told SHN private equity would be the biggest buyer of senior housing assets in 2023, followed by private REITs and regional operators at 19%, with public REITs and institutional investments trailing at 11% and 10%, respectively.

Almost half of the respondents, 45%, said repositioning existing market rates was their preferred way to create more middle-market senior housing, followed by developing such properties (23%), acquiring,(16%) and expanding market reach (12%).

The respondents were confident that asset values would fall, with 41% forecasting a drop in senior living valuations compared to 33% saying valuations would remain the same and 26% saying they would rise.

Respondents were divided on the best growth strategy for the year ahead, and nearly a quarter of them reported that organizations do not have growth strategies in place.

For 2023, 32% of respondents said they would renovate or reposition assets, up 2% from last year followed by 33% with no growth strategy, up from 24% in 2022.

A total of 23% said they would likely grow through new building development compared to 25% last year. A total of 21% of respondents said they would seek affiliation or seek a merger, compared to 12% in 2022. 

To hear more about the industry’s challenges and opportunities ahead, tune in to our Senior Housing Finance and Investment Outlook for 2023 with NIC Chief Economist and Director of Outreach Beth Mace, Belmont Village Founder and CEO Patricia Will and Solera Senior Living Founder and CEO Adam Kaplan on Thursday, Jan. 26, at 11 a.m. Central.

The post Senior Living 2023 Outlook: Opportunity Ahead, But No Short-Term Fixes appeared first on Senior Housing News.

Source: For the full article please visit Senior Housing News

Be First to Comment

    Leave a Reply

    %d bloggers like this: