As 2022 begins, headlines are unfortunately reminiscent of two years ago, featuring news of Covid-19 case counts, global disruptions to business and transportation, and even whole cities going into lock down.
But for the U.S. senior living industry, history will not repeat itself in 2022.
That’s thanks largely to the number of residents vaccinated against Covid-19 and the industry norm of vaccine mandates for workers. Although omicron raises legitimate concerns about increasing infection rates, senior living providers are understandably confident that their communities will remain among the safest places to live and work.
However, the pandemic’s fallout — such as labor woes, inflation and supply shortages — will continue to weigh on the senior living industry in 2022. Owners, operators and other stakeholders will need to be proactive, creative and nimble in the face of such challenges.
The good news is that many companies have cultivated just these capabilities throughout the last two years. Best-in-class providers will withstand the pressures of 2022 and will gain strength through new partnerships, portfolio growth, and investments and innovations in operations.
Senior living providers also can take heart in strong consumer demand, which is already leading to occupancy growth and pricing power.
So while 2022 will include more pain, the year ahead also will also bring notable progress toward a brighter future for senior living.
2022 will be a “best-ever” year — and a “worst-ever” year
For senior living, 2022 will be a year of extremes — for better and for worse.
For example, revenue could reach historically high levels, but so too could expenses. Such a scenario already has started to take shape.
Welltower (NYSE: WELL) reported best-ever sequential revenue growth in Q3 2021, with topline revenue up 3.5% on the strength of rate and occupancy increases. And observing the current pricing power, Brookdale (NYSE: BKD) CEO Cindy Baier expressed her optimism that rate increases could make 2022 “one of the best years in the industry’s history.”
At the same time, Welltower’s bottom-line results for Q3 2021 were “mediocre,” due to what CEO Shankh Mitra described as a “perfect storm of expenses.”
And while Brookdale executives shared their optimism that labor costs and other expenses will moderate, investors appear to be less bullish. Brookdale’s share price hit $8.59 in July but was sitting at $5.17 on Dec. 23. The rise of the omicron variant no doubt is weighing on investors’ minds; their perspective might change if omicron cases decline just as 2022 rate increases take effect in the first quarter. Still, the industry could be facing a “worst-ever” year for expenses in 2022 — with labor costs joined by higher costs for insurance, materials and supplies.
Beyond revenue and expenses, 2022 will be a year of extremes in various other ways. Senior living development projects will be bigger than ever and smaller than ever.
On the “bigger” end of the spectrum, expect new highrise projects to be announced, as senior living teams take advantage of the disruption in the hotel and office sectors to secure urban real estate. Continuing care retirement communities (CCRCs) performed well during the pandemic, so anticipate efforts to create these sprawling projects. And 2022 could bring the first U.S. forays for Canadian companies seeking to create versions of the successful — and very large — retirement communities that they have built north of the border.
On the other end of the spectrum, more senior living projects will be focused on the small-home trend, to create affordable environments that are easier to secure from an infection control standpoint. Such projects might involve campuses of modular or prefabricated tiny houses, or dwellings arranged in “pocket neighborhoods.” Dr. Bill Thomas is a proponent of such communities, with the Kallimos Communities and Minka initiatives. The trend also includes the growth of franchised residential assisted living, as exemplified by Majestic Residences.
Not only will communities become bigger and smaller than ever, but some will redefine the high end of the market, while senior living will also become more accessible than ever for less affluent consumers.
In terms of luxury, the urban offerings from Coterie, Inspir, Sunrise and Watermark already are setting the bar higher than ever, with designs, technology offerings, hospitality services, health care, prime locations and other components justifying monthly rates of $20,000 or more. Providers such as Balfour Senior Living, Solera Senior Living and Galerie Living are also pushing the envelope on luxury. In 2022, expect further innovations in luxury senior living, such as the recently announced plan from Hallmark Properties to create three “ultra luxury” residential assisted living communities of fewer than 20 rooms, with residents having access to a gourmet chef and a personal butler.
At the same time, more senior living providers will make good on their plans to serve middle-market consumers in 2022. On the leading edge of this trend, 2Life Communities just announced plans for its first middle-market Opus community, making progress on a concept that has been in the works. 2Life is just one of many senior living organizations that has been contemplating how to serve the middle market, given the incipient demand that was quantified in research released in 2019. The next 12 months will bring more concrete examples of how providers and investors believe they can meet this demand, with Transforming Age and Seasons Living being two such organizations to watch.
The launch of new projects and innovative models will make 2022 a year of renewal and excitement in senior living. Adding to this energy, some providers will regain or surpass pre-pandemic occupancy levels, and harness new technologies and operating practices to increase efficiency and get a handle on the bottom line. Already, as 2021 wound down, Kisco’s Andy Kohlberg said the company’s leaders have been “shocked” at the rapidity of occupancy recovery.
On the other hand, the pandemic has been an increasingly hard slog for some providers, particularly those that were on tenuous financial footing already. While they have been buoyed by a mix of lender flexibility, government relief and post-vaccine occupancy recovery, some will hit the breaking point in 2022, given the labor situation, the omicron variant, growing investor and lender impatience and other factors. As Welltower’s Mitra put it, some “spectacular failures” are inevitable.
So, along with excitement and momentum, 2022 will include a lot of hand-wringing and dark days — but ultimately, the building designs, operating models, financial margins and penetration rates of the future will come into view.
The ‘regional reset’ begins
The last 12 months were defined by the “rise of regionals,” as many regional operators rapidly gained scale through a slew of acquisitions and management transitions. The next year will be about the “regional reset,” as these providers start to reshape the industry.
In particular, regionals are expected to drive occupancy and workforce stability through a localized approach to sales, marketing and hiring. But this has always been the potential upside of regional management; this dawning era will test whether regionals can be even more effective than in the past through additional capabilities and new corporate structures.
For instance — as Ventas’ Justin Hutchens recently pointed out — technology for customer relationship management, workforce management and other essential business functions is more widely available and affordable than in the past, enabling regionals to operate more efficiently.
Additionally, ownership groups appear to be increasingly aware of the need to more closely align interests with operators and ensure that they are well-capitalized enough to invest in technology. From management contracts that involve larger promotes or incentivize on both top- and bottom-line performance, to programs that subsidize the cost of tech, owners and operators appear to be taking steps to enable steadier performance and continual improvement.
Furthermore, owners and operators have observed the challenges that arise as regionals expand, straining the ability of corporate leadership to closely manage growing portfolios. Now, some regional providers are trying to solve this issue by reconfiguring their org charts.
Phoenix Senior Living moved away from the typical “tripod” model involving heads of sales, clinical and operations, with teams built out beneath them.
“We’ve really flipped that model and truly gone into more of a small business, entrepreneurial support model, where our regional directors of ops support five to seven properties,” CEO Jesse Marinko explained.
And then there’s the example of Discovery Senior Living — one of the largest national operators, which has essentially created new, largely independent regional management companies to take on portfolios acquired in the last year. The concept here is to glean the advantages of regional operators, overlaid with sophisticated back-end support from Discovery.
No doubt, the regional reset will involve some operators that grew too fast and start to struggle, and not all the new approaches to infrastructure, alignment and organization will succeed.
But if the regional reset generally goes well, that will mean that best-in-class operators have seized opportunities to expand during the pandemic, and industry standards will rise thanks to their increased influence.
The price is finally right
In recent years, more powerful business intelligence (BI) capabilities have started to enable a new approach to senior living pricing. In 2022, these new pricing approaches will firmly take hold across the industry.
Such approaches are based on the ability to crunch large volumes of data on market dynamics, consumer profiles, and aspects of operations — such as how often certain services are rendered and how delivering these services equates to staff time and effort.
Now, providers across the industry are pushing to regain occupancy while also protecting margins that are under incredible pressure. Significant rent concessions are not viable in this environment, and so operators will see that BI capabilities are essential in being able to price their offerings appropriately and — in particular — confidently charge for a la carte services.
Doing so will enable providers to “unbundle” their pricing, which should drive sales by allowing operators to offer prospects more customized packages, while also ensuring that operators’ revenue closely aligns with what they are delivering to residents.
Data-driven, unbundled pricing also will gain importance as more middle-market product comes to market. Setting rates at the appropriate level and offering some a la carte services are especially important in these emerging models, which are rooted in tight expense management while offering a product that residents see as a good value.
Increasing adoption of BI-driven pricing will also contribute to revamped sales processes, which also will set rates more appropriately than in the past. Large providers such as Brookdale, LCS and Discovery have overhauled their sales processes in recent years, and the urgent need to protect margin in 2022 should have more operators across the sector doing so as well.
Already, sales teams appear to be appropriately emboldened by the fact that prospects with real estate and stocks are flush, while Social Security payments also are up — having business intelligence at their fingertips to explain how prices equate to value will be another valuable tool at sales teams’ disposal.
If BI-driven pricing and better sales practices come together, Brookdale’s Baier will be proven right in her prediction that 2022 will be a high-water mark for the industry’s top-line performance.
Staffing scramble makes “full-time employee” a rarer breed
In November 2021, nursing and residential care facilities lost 11,000 jobs, according to Bureau of Labor Statistics data. So, it’s no surprise that 45% of multi-site providers reported staffing shortages in the latest NIC Executive Insights survey.
In 2022, intense labor challenges will persist — as Kisco’s Kohlberg recently noted, workforce pressures did not significantly ease with the expiration of enhanced unemployment benefits or the resumption of in-person school in 2021, so there is no reason to expect recruitment and retention to get easier in the new year.
As a result, the traditional full-time employee (FTE) will become a rarer breed in senior living communities across the country.
Already, this is occurring, as providers turn to agency workers to fill gaps. More than 75% of NIC survey respondents said they are using agency or temporary staff to help address shortages, 57% said their agency and temp use increased by up to 50% in 2021, and 20% said that agency/temp use increased by 100%.
This level of agency use is not financially sustainable for providers. In 2022, more organizations are going to take bolder steps to reconfigure their staffing strategies.
Consider the pilot that Aegis Living is undertaking. The Bellevue, Washington-based provider is experimenting with an in-house staffing agency, essentially creating an internal workforce of people who are willing to trade off on benefits for a higher hourly wage and more flexible scheduling, including more part-time work.
The goal is to respond to the shift in worker expectations and preferences that has occurred during the Covid pandemic, as people have reevaluated the work-life balance they want to strike, Aegis CEO Dwayne Clark told SHN. He also aims to widen the pool of senior living workers to include people such as recent refugees, retired military personnel, stay-at-home parents and older adults.
Other providers also will offer more flexible, part-time and on-demand scheduling. Technology will be key to enabling these efforts. At the NIC conference in Nov. 2021, Justin Hutchens described using tech to create a pool of gig workers who could take shifts as they became available, when he was CEO of U.K. provider HC-One.
This “bank staff” ultimately totaled about 10% of the HC-One workforce.
“That gave us a large part of our workforce that was flexible, and certainly was playing straight into what the market was demanding from an employer standpoint,” Hutchens said.
Not every senior living provider has the scale or wherewithal to create technology and build a flexible workforce in-house. But providers can turn to a rising class of tech-driven staffing companies that specialize in senior living and post-acute care settings. Two such companies — ShiftMed and KARE — secured funding rounds in 2021 and will be expanding in the year ahead.
The shift away from traditional FTEs in senior living will bring challenges, including ensuring consistency in quality, and addressing resident concerns about the difficulty of establishing relationships with rotating staff.
However, these concerns will not prevent forward-thinking senior living providers from taking fresh approaches to staffing in 2022, in order to meet the challenges of the moment and create a workforce for what Lloyd Jones COO Tod Petty described as “a new world.”
On-site primary care, care coordination reach tipping point
Over the last several years, an increasing number of senior living providers have found ways to bring primary care services into communities.
In 2022, on-site primary care will reach a tipping point, going from a “nice-to-have” to a “must have.”
The tipping point will arrive for several reasons. One is the continual growth of Medicare Advantage (MA) within the senior living sector.
Already, primary care is being delivered on-site in certain communities through arrangements between senior living companies and primary care groups reimbursed largely through MA plans — one example being the CareMore/Welltower partnership. More of these initiatives will take shape as MA insurers continue to apprehend that senior living communities offer efficient venues for enrolling new members and delivering services to maintain these members’ health and wellness, keeping costs down in the process.
Additionally, tech-forward primary care practices focused on serving the MA population secured massive amounts of capital in 2021, including through initial public offerings and SPAC deals. These groups, such as Cano Health and CareMax, are in expansion mode and eyeing opportunities to work more closely with senior living providers. Although most of their services are delivered in stand-alone care centers, expect to see these companies establish a presence in senior living communities in the next 12 months. And at least on the West Coast, they might have to play catch-up to Pine Park Health, a growing company that specializes in bringing primary care to senior living, with partners including HumanGood and SRG.
Senior living-owned MA institutional special needs plans (ISNPs) also are becoming more commonplace, driving the integration of primary care within senior living settings. In one example, MA insurer UCare recently invested in Lifespark, the value-based care company that operates the former Tealwood Senior Living portfolio. Now officially a “payvider,” Lifespark views senior living campuses as important nodes for the delivery of a variety of services, in an effort to eliminate the “bottlenecks” in care that residents typically have experienced.
Consumer expectations also will drive more senior living providers to offer on-site primary care. Residents and their loved ones are more attuned to health care offerings in light of Covid-19, and limiting exposure to crowds in doctors’ offices and hospitals has never before been such a high priority.
Consumers also will increasingly demand that senior living providers manage residents’ care more closely than in the past.
“It’s now not just caring for people in terms of feeding them and providing entertainment and activity; it’s really taking on a lot of the responsibilities that the adult children took on and saying, that’s now our responsibility — coordinating care,” Chicago Pacific Founders (CPF) Chairman John Rijos told SHN at the 2021 ASHA Mid-Year Meeting.
As the senior living provider becomes a care coordinator, it stands to reason that senior living communities increasingly become hubs for a variety of services, not just primary care. Health system partnerships that bring concierge-style care into senior living are responding to this imperative.
Such partnerships are in place at the highest end of the market, with the likes of Atria, Maplewood and Sunrise partnering with health systems such as Mayo Clinic, Mount Sinai and Northwell Health in ultra-luxury communities. Other high-end providers such as Kisco Senior Living and Solera Senior Living are also forging health system partnerships.
But more moderately priced senior living communities also are working with health systems to make primary care more readily available to residents, with one example being Geisinger’s partnership with Clover communities, facilitated by Welltower. Again Medicare Advantage plays a role in covering the cost of services; and while this arrangement is not bringing primary care on site to Clover communities, the writing is on the wall that the industry is headed in this direction.
Memory care booms
After enduring a difficult few years, the memory care sector is set to flourish in 2022.
The problems in memory care pre-dated Covid-19, due to an influx of new supply, with construction peaking in late 2015. As these units came online in subsequent years, the market was strained by oversupply, while length of stay also was declining. Occupancy fell, leading to distress and sizable operator transitions.
Then Covid-19 hit, and memory care communities were ravaged, as residents with dementia could not understand the necessity of social distancing and other pandemic mitigation procedures. Of all senior living sectors, memory care shed the most occupancy between Q1 2020 and Q2 2021, according to NIC data.
More recently, however, the trends have started to reverse.
Memory care added the most occupancy out of any senior housing type between the second and third quarters of 2021. Memory care move-ins hit a recorded high of 4.7% of inventory in March 2021; while this has slowed somewhat, memory care move-ins still outpaced independent living and assisted living in Q3 2021, at 3.9% of inventory.
These numbers support what providers have reported to SHN. For example, executives with Sonida Senior Living (NYSE: SNDA) — formerly Capital Senior Living — said that memory care has outperformed assisted living and independent living in terms of occupancy recovery. And Pegasus Senior Living CEO Chris Hollister is most bullish on memory care going forward.
No doubt, occupancy has rebounded because of the needs-based nature of memory care — people simply cannot defer moves as long as they can for other care levels. However, this is not the whole story.
Timing is also at play. The recent oversupply was due in part to developers who rushed into the market to serve the huge baby boomer generation, but they were five to 10 years ahead of the boomer demand for memory care, said Mitch Warren, after his memory care development company The LaSalle Group had to file for Chapter 11.
Seven years out from the recent construction peak, memory care communities are now welcoming residents who are on the leading edge of a massive demand wave, if Warren was correct.
Innovation in memory care also is playing a role in attracting residents. Despite — or due to — the challenges that memory care has faced, some providers have invested time and money in recent years in revamping their memory care offerings, and they are poised to be rewarded.
Sonida is one case in point. The Dallas-based operator rolled out its Magnolia Trails memory care model in 2021, with wellness and resident engagement being guiding principles. Sonida CEO Kim Lody credits Magnolia Trails with differentiating Sonida’s offering and driving move-ins.
Sonida is not alone. One of the most-read SHN stories of 2021 bore the headline “Memory Care Innovations Take Hold in Wake of Covid-19.” Frontier Management, Discovery Senior Living, Benchmark, and Sunshine Retirement are among the providers that have overhauled their memory care programs or introduced new innovations in operations and design. Going forward, expect even more creativity and refinement in memory care models — for instance, Bella Groves is bringing a membership model to market, blending consumer education, B2B consulting and traditional memory care.
To be sure, the memory care sector still faces significant challenges. Pegasus’ Hollister remains wary of standalone memory care, and is focused on adding memory care as part of a continuum to serve “built-in demand” as IL and AL residents develop cognitive support needs.
And memory care initial rates were discounted 9.3% from asking rates in September 2021, according to NIC data. That’s up from a 7.5% discount one year prior, and steeper than September’s 8.3% assisted living discount. Memory care providers will have to be cognizant of protecting revenue even as occupancy climbs.
But after a tumultuous period, memory care providers have reasons to be optimistic as they turn the calendar to 2022.
Personalization reshapes the resident experience
Streaming platforms suggest shows that subscribers might like. Retail websites prompt consumers to re-stock on their favorite products just when they’re needed. Music playlists learn listeners’ preferences, and ads on social media reflect users’ interests.
For better or worse, this is the age of personalization. In 2022, senior living operating models will be reshaped around the need to customize the experience for each resident.
Some providers already are leading the way.
Holiday Retirement is seeking to collect and analyze data to customize residents’ experiences to their interests and goals, CEO Lilly Donohue told SHN in 2021. The independent living giant is leveraging its Holiday365 tech platform to make it easier for residents to see available engagement options, sign up to participate, and share information about their favorite pursuits. The goal is to adjust each community’s offerings to meet its resident base, and to increase engagement by promoting activities, programs and other opportunities to individuals in a targeted manner.
Mather is another provider focused on personalization. The nonprofit recently proposed a new wellness framework for senior living, in a report that posed this question:
“At a time when virtually everything else around us can be customized, shouldn’t our wellness plan be as well?”
Mather’s “person-centric wellness model” is meant to replace the typical “six dimensions of wellness” that many providers use to organize their resident experience programs. To drive the more individualized approach, Mather is developing a wellness assessment tool and is engaged in a wellness coaching initiative, envisioning that such coaches will play an important role in working with residents on their unique wellness plans.
And Lynne Katzmann — CEO of Juniper Communities and a member of the senior living Hall of Fame — also sees personalization as a crucial part of the future senior living model. Her vision for a “high-tech, high-touch” approach includes the use of genomic information and other data to create “lifestyle prescriptions” for residents, based not only on their interests and goals but on their likelihood to benefit from particular, proactive health and wellness-related activities and interventions.
Furthermore, new luxury communities from the likes of Watermark Retirement, Maplewood Senior Living and Atria Senior Living take inspiration from the concierge-style, individualized experience that high-end hotels have traditionally delivered, based on their knowledge of frequent guests’ habits and preferences.
As these examples show, personalization is now possible at any price point — from the mid-market independent living communities of Holiday to the $20,000-a-month communities opening in major metros.
In the age of personalization, providers will have to address privacy concerns as they collect more individualized information about residents. And in more moderately-priced communities, providers will have to achieve personalization without sacrificing too much operational efficiency or driving labor costs too high in order to facilitate a “high-touch” experience.
But forward-thinking providers will be solving these problems in 2022, while investing in the technology and undertaking the change management needed to meet future consumers’ expectations — which are being shaped day-by-day by the likes of Netflix, Amazon and Pandora.
Active adult faces more competition from unconventional models
In recent years, the rise of active adult rental communities has been one of the major stories in senior living, and this trend will continue in 2022. But in the coming year, active adult communities will face more competition from the likes of co-living, manufactured housing and co-ops, as entrepreneurs and investors vie for the sought-after demographic of younger boomers.
Manufactured housing is a particularly hot segment, with a recent JLL report showing transaction activity and valuations at all-time highs. Soaring single-family home prices have caused consumers of all ages to consider manufactured housing as a more attainable option. Private equity capital is pouring into the space, and age-restricted manufactured housing should be an especially attractive opportunity to investors who are eyeing demographic trends and the growing middle-market demand.
With PE funds sitting on vast amounts of capital heading into the new year and uncertainty still gripping traditional senior living, expect some manufactured housing plays. The influx of capital should support innovation in manufactured housing, including more elevated amenities and perhaps even co-location with senior living properties. Investors such as Harrison Street, SmartStop and Green Courte — which already have manufactured housing and senior living portfolios — could drive the creation of next-generation manufactured housing for active adults.
While for-rent manufactured housing could be a growth market in 2022, the traditional manufactured housing model involves ownership of the housing units — and this appeals to a segment of the older adult population that is reluctant to give up home ownership. This desire also will fuel continued growth of co-op senior living.
In what could be a harbinger of things to come in 2022, United Properties recently announced intentions to triple its senior living portfolio, which includes rental active adult and co-op communities in which older adults own their homes.
United Properties is based in Minneapolis, which is a hotbed for co-op senior living. Other players in the market include Ecumen, which operates co-ops under the Zvago brand. Co-ops proved resilient during Covid-19, with expenses relatively stable and sales remaining strong. The demand for co-op living — which places a premium on engagement with fellow residents and gives members a say in operational considerations, including costs — is real and robust, according to Ecumen VP of Partner Services and Living Spaces Dana Meyer. Investors outside the Twin Cities no doubt have observed this demand, and in 2022 will ramp up efforts to meet it.
On the co-living front, startup UpsideHom raised $2.25 million in seed funding in 2021. The UpsideHom model includes a roommate matching service to bring older adults together in specially equipped apartments, and overlays various services and supports, including access to “Papa pals” for companionship or light household assistance (Papa co-founder Jake Rothstein also co-founded UpsideHom).
While UpsideHom has seen more limited engagement with its roommate matching component than initially anticipated, about 50% of the company’s business involves consumers looking to share units, TechCrunch reported. Other senior living companies and investors also will take steps toward co-living in the next year.
As one example of the potential for creativity and growth, Vitality Living recently constructed “quad” style cottages as part of its development project in Madison, Georgia. The model emulates student housing in blending shared common spaces with private living quarters, and Vitality has seen uptake in particular among siblings, cousins and other family members — meeting the traditional southern preference for maintaining close family ties, Vitality Founder and CEO Chris Guay observed.
Innovations in options for younger boomers will not be limited to manufactured housing, co-living and co-housing; new intergenerational models also hold promise, for example. And creative development projects that were slowed down by the pandemic are poised to move ahead more rapidly in 2022.
Given the size and diversity of the baby boomer generation, a variety of different models can and will flourish. As more startups and innovative projects burst on the scene in 2022 and beyond, the most successful efforts will be those that meet the needs and desires of their particular consumer bases, and clearly define and market their value propositions.
Well-capitalized developers lap the competition
As 2022 begins, developing new senior living communities is an even more difficult undertaking than usual, due to supply chain disruption, high costs for labor and materials, and wariness on the part of lenders to finance projects in an uncertain environment.
These issues were cited repeatedly during the Senior Housing News BUILD event in November, where LCS Development Executive VP and Managing Director Chuck Murphy said that he expects the challenges to persist for the foreseeable future.
“The new buzzword is ‘just in case,’ instead of ‘just in time,’” he said, referring to the strategy of ordering equipment and supplies in light of uncertain delivery timelines.
Yet despite the complications and costs, Murphy and other BUILD speakers agreed that now is an ideal time to pursue development — for organizations that have the right capabilities.
One requirement is ready access to capital, with partners who understand the senior living market and are patient. Welltower (NYSE: WELL) fits that profile, and the REIT is active on the development front, including through a recently announced joint venture with Kisco Senior Living.
The current costs are not deterring Kisco and Welltower from seeking out development opportunities, because the organizations have a long timeline, Kisco’s Kohlberg recently said during an SHN+ TALKS appearance.
“It doesn’t scare us because we think that down the road, it’ll be a full community, and we know whether prices are up, say, 5% or 10%, 10 years from now, isn’t going to make that much of a difference,” he said.
Welltower also is partnering on developments with Atria Senior Living, including the luxury Coterie highrises and a community in a mixed-use development in New Jersey. At BUILD, Atria CEO John Moore commented that now is the time to “step on the gas” with regard to development, in order to have new communities opening to meet the incipient demand from baby boomers.
And Welltower is not the only REIT bullish on development. Omega Healthcare Investors (NYSE: OHI) is also ready to seize the moment, with partner Maplewood Senior Living.
“Knowing that things will take longer and be more expensive, we take that into consideration when we do our underwriting, and we know that we could hit a hiccup, but I don’t think that’s a reason not to be developing right now,” Maplewood CEO Greg Smith said at BUILD. “Being out there when there’s not a lot of supply, and hitting the ground running, is something we’re going to be focused on.”
Current barriers to development eventually will ease, but in the meantime they are helping solve the oversupply problem that the industry faced prior to the Covid pandemic. In the long run, construction will ramp back up and banks will again start to finance projects involving sponsors with less senior housing experience — but the industry will benefit from the high-quality projects that will be announced in 2022 and open a few years down the line.