The senior housing industry is in the midst of a big disruption. Occupancy in assisted living hit a record low in the first quarter of 2018 – and continues to fall. There could be numerous reasons for this, including a bad flu season, but I think there’s something bigger going on.
At a recent conference I attended, one of the speakers addressed this subject. He suggested that two major influencers are driving the disruption.
- Labor shortage. A labor shortage is anticipated for high-intensity facilities such as assisted living, memory care, skilled nursing facilities. The average wage for a CNA (certified nursing assistant) is currently $11 per hour. Soon, the speaker projects, it will be $15. This will cause an 8% drop in NOI which translates to a 27% decline in asset value! Or, more likely, rents will rise, and such facilities will become even less affordable.
- Technology. And this is where it gets cool! Technology is focusing on aging-in-place, allowing seniors to avoid institutional facilities longer. The speaker shared that aging-in-place technology will become a $7 trillion economy. Venture capital is investing 10:1 on technology versus operational improvements.
So how does this affect you and me?
It means we can age in place almost anywhere. The secret is in choosing the place. If we live long enough, each of us will need assistance at some point, (although most of us refuse to admit it). But technology will allow us to live wherever we choose with on-demand assistance as necessary.
Even today, technology is available to get us what we need, when we need it: a voice activated communications system connected with family or emergency-response team; a sensor to monitor activities and detect irregularities; a wrist band connected to an AI platform that alerts the doctor if anything is out of kilter; apps to remind us to take our pills; apps to call a ride; apps to order meals; apps to request assistance with dressing or bathing; apps for help hanging pictures or rearranging furniture.
And that’s today. Just wait until that $7 trillion investment is realized!
I project the future of senior housing will be focused on the independent-living model with limited services – which will be offered a-la-carte. Technology will replace the need for personal assistance. We will not need (nor can most of us afford) the full staff that comes with assisted-living facilities. With this exciting new technology, we will remain independent much longer as we age in place.
But aging-in-place doesn’t mean staying in your four-bedroom colonial with stairs, narrow doorways, and slippery bathtubs. Forward-thinking baby boomers are eschewing their large family homesteads that require constant up-keep and high taxes for luxury apartment living. Here, they can age in place, but in a place with more amenities, more fitness activities, more social involvement, and more companionship. And that socialization is very important. Studies show that social isolation increases the risk of death by 30%; some show it as high as 60%!
Assisted living and memory care facilities, of course, will still be needed, but they will have a much higher cost and be even less affordable to the average senior. That said, senior housing still ranks as the most attractive property class for investment according to a recent survey of commercial real estate owners, managers, developers, and lenders.
So, we will age, in place, independently, and wherever we want. And I suspect most of us will choose an independent-living community surrounded by like-minded, active, involved friends – and cool technology!
Christopher Finlay is Chairman/CEO of Lloyd Jones, a real estate investment firm that specializes in the multifamily and senior housing sectors. Based in Miami, the firm acquires, develops, improves, and operates multifamily and senior housing communities in growth markets throughout Texas, Florida, and the Southeast. The firm’s investment partners include institutions, family offices, and individual accredited investors.