With optimistic momentum on occupancy and margin in 2024, the senior residing trade is poised to capitalize on incoming demand — however many challenges stay.
These challenges embody still-tough growth situations as the availability and demand hole widened this yr, which led to buyers and builders within the house principally shying away from speedy new development.
Different challenges stay in creating an inexpensive product accessible for older adults of all monetary standing, and creating inclusive areas to fulfill the wants of a very numerous inhabitants of older adults.
However on the similar time, there’s immense alternative forward for the trade as suppliers develop their working fashions, evolving to fulfill the wants of residents that demand extra life-style and wellness choices.
These and different traits had been evident in leaders’ statements captured in Senior Housing Information in 2024, and the next excerpts spotlight the strides made throughout the sector this yr as organizations carry massive aspirations into 2025.
“There’s going to be, I believe, an amazing quantity of offers [and] growth alternatives, in all probability extra towards mid- to later-2025.” – Constitution Senior Residing CEO Keven Bennema
Bennema’s feedback got here as Constitution Senior Residing was busy. The corporate took on administration of 20 communities and opened two new developments, with three tasks anticipated subsequent yr and 2026.
With three charge cuts by the U.S. Federal Reserve in 2024, coupled with transaction quantity of publicly-announced senior housing offers exceeding the deal volumes reported in 2022 and 2023, it’s clear why there’s nonetheless optimism held by Bennema and others within the trade.
Low provide and growth will give operators an opportunity to bulk up and proceed to drive census in 2025 and past, as extra favorable financing situations might materialize within the latter half of the brand new yr and convey capital-strapped buyers off the sidelines.
Nonetheless, there’s uncertainty that surrounds that optimistic mindset, as operators try to get the timing proper on their enlargement plans to serve the incoming child boomer era.
“For those who have a look at any trade, any financial downturn, the restoration takes extra time than the downturn.” – Omar Zahraoui, Senior Principal, the Nationwide Funding Heart for Seniors Housing & Care
The final 4 years for the trade have introduced a number of the biggest challenges to bear in regard to staffing, affordability and a gambit of operational challenges. However the trade has made up unimaginable floor from the troubling days of 2020, and indicators level to the lengthy restoration interval nearing its finish – barring one other massive shock to the system.
NIC forecasts the trade might hit 92% occupancy by the top of 2026 if present traits stay regular, with the typical occupancy being 86.5% within the third quarter of 2024, 1.2% beneath the primary quarter of 2020.
The shortage of latest development begins within the final 4 years has helped drive this rebound in occupancy.
Whereas there are short-term income alternatives on account of lack of latest provide, firms threat probably failing to fulfill long-term demand for senior residing, which makes 2025 exceedingly extra essential for brand new progress to proceed.
This has led some operators to push exhausting on reinvesting in or repositioning communities to fulfill incoming demand, as we’ve charted how Maplewood, Felician Companies, Senior Way of life and LifeSpire are taking reinvestment postures heading into 2025.
“Our gross sales and advertising groups are leaning into new and distinctive gross sales campaigns on the native market and nationwide degree to drive certified leads and appeal to new residents.” – Brookdale CEO Cindy Baier
This yr additionally noticed senior residing operators of various sizes take completely different approaches to gross sales and advertising techniques, as suppliers moved away from third-party referral sources in lieu of extra in-house, ground-up gross sales efforts.
Brookdale Senior Residing (NYSE: BKD) just isn’t the one publicly-traded firm within the trade to pivot away from third-party referrals to inside advertising and promoting. Sonida Senior Residing (NYSE: SNDA) can also be making the change.
Gross sales and advertising efforts in 2024 additionally centered on on-line communication with prospects and even reimagining how operators rent gross sales employees.
Earlier this yr, Michigan-based operator Beztak shared how characterizing gross sales employees promoting types has helped in hiring new gross sales crew members. There are nonetheless perennial challenges relating to response time to on-line and cellphone inquiries, however some operators seem like getting critical about treating inquiries with extra urgency, akin to a senior residing “911 name.”
Nonetheless, it’s no secret that gross sales and advertising efforts within the trade stay a problem, chief amongst them connecting with households and prospects unfamiliar with the trade, particularly if firms wish to usher in youthful residents.
“[Operators] have to be cautious in assuming giant charge will increase.” – Discovery Senior Residing CEO Richard Hutchinson
In 2024, operators elevated resident rental charges at a steeper tempo than what’s anticipated for 2025 as greater income and decrease prices – aided by traits in greater occupancy and size of keep, and easing inflationary stress – push common margins greater.
Corporations like Discovery Senior Residing have relied on market knowledge to positive tune charges, from single-digit will increase in some markets to double-digit will increase in others.
Demonstrating worth stays a troublesome job for operators, as some firms have taken steps to renovate getting older communities to have the ability to drive charge.
However one factor is evident: Operators are taking a extra exact tact in implementing charge will increase in 2025 and past.
“We really feel that that is the true property cycle to essentially put money into, and we don’t know the way giant the window goes to be. This is a chance to co-invest and be alongside our nice capital companions, and having a little bit pores and skin within the recreation, it’s a very thrilling subsequent section for us.” – Precedence Life Care CEO Sevy Petras
In 2024, some senior residing operators took strides to gas future progress by numerous funding efforts. In Could, New Perspective Senior Residing introduced a $200 million capital infusion and plans for $500 million allotted for future acquisitions and growth.
In August, Precedence Life Care launched a common companion co-investment fund of $10 million to gas $200 million in whole fairness for acquisitions and co-investment.
Additionally this previous summer time, Brightview Senior Residing launched its ninth fund with a goal of over $200 million. The corporate’s earlier fund, which noticed contributions from 363 buyers, introduced in $202 million, successfully financing development of eight communities by 2026.
Earlier this fall, Stellar Senior Residing introduced plans for a $25 million fairness and three way partnership funding effort to capitalize on the wealth of acquisitions out there for operators as growth stays muted.
Whereas growth situations stay a problem, senior residing operators have pivoted their progress methods, and are poised to deploy important quantities of capital in 2025 and past.
“Ready just isn’t a recreation that builders play.” – Shannon Rusk, Senior Vice President of Improvement, Midwest, Oppidan
Even whereas situations for brand new growth are lower than favorable, these energetic in constructing new communities stored a way of urgency in 2024, noting the turnaround time it takes for a mission to get constructed and opened.
This sense of urgency could possibly be warranted because the period between development and opening has solely elevated lately. NIC put the typical development mission ranging between 24 months and 25 months within the final two years.
Growing older provide stays a prime concern for operators seeking to seize incoming demand, with NIC knowledge exhibiting that roughly 41% of senior residing communities are greater than 25 years outdated. That coincides with the inhabitants of these 80 years and older rising by 35% by 2030, a rise of 5.1 million older adults, NIC knowledge reveals.
Colorado-based Expertise Senior Residing is without doubt one of the senior residing suppliers that pushed forward on new growth in 2024, with a number of tasks in various types of development in city and first markets.
Whereas there are lots of acquisition alternatives, constructing new communities will help higher seize new resident demand, bringing in youthful residents. This yr, a choose few operators got here off the sidelines pushing new growth, however whether or not that adjustments in 2025 stays to be seen.
“Half of it’s having the fervour and dedication for change … We’ve to guarantee that it’s not simply lip service and we wish to scale back or get rid of concern — that’s our mantra.” – Watermark Retirement Communities CEO and President David Barnes
Even amid “DEI fatigue,” Senior Housing Information did report on some senior residing operators in 2024 placing forth a renewed effort to attach with LGBTQ+ older adults, particularly trans older adults, to additional inclusivity within the trade. This can be a key means operators can enhance DEI efforts of their communities, and operators start to acknowledge that connecting to LGBTQ+ people isn’t only a advertising instrument — it’s a “enterprise value-add.”
Operators have partnered with Companies and Advocacy for LGBTQ+ Elders (SAGE) in 2024 to carry new coaching and cultural competency for his or her employees, whereas additionally updating insurance policies to create extra inclusive workplaces for workers.
This effort transferring away from lip service to direct motion shall be an essential concern to observe transferring into 2025, significantly in mild of shifts within the nation’s political alignment and in enterprise insurance policies – see Walmart’s latest rollback of DEI initiatives as one instance.
“An organization that controls its actual property and controls its operations goes to have limitless worth since you don’t should pry one from the opposite to make a sale. It’s all synergetic.” – Aegis Residing CEO Dwayne Clark
In 2024, operators took motion to accumulate larger management of their portfolios.
Brookdale Senior Residing (NYSE: BKD) is arguably essentially the most seen instance, because the trade large bought 41 of its leased communities for $610 million.
Whereas not all working firms have the flexibility to purchase parts of their portfolios, these with lease-to-purchase contracts could possibly be properly positioned to take larger management of communities because the trade adjustments the calendar to 2025.
“The shift from fee-for-service into value-based care is excessive octane and better threat.” – Solera Senior Residing CEO Adam Kaplan
The tempo of value-based care adoption in senior residing appeared to speed up into the next gear in 2024, as suppliers together with Benchmark Senior Residing, Epoch Senior Residing and 12 Oaks Senior Residing introduced numerous new partnerships for main care alignment, know-how integration or care coordination.
Brookdale expanded its rollout and progress of the HealthPlus program in preparation for a time when “nearly each senior shall be on a Medicare Benefit plan” sooner or later, Baier instructed SHN earlier this yr.
Additionally in 2024, senior residing firms, together with operators and tech platforms, introduced their involvement with the Guiding an Improved Dementia Expertise (GUIDE) mannequin from the Facilities for Medicare & Medicaid Companies (CMS). This might permit for operators to higher obtain value-based care objectives associated to care integration and price financial savings, particularly in serving these with reminiscence care wants.
However excessive threat and potential misalignment between well being care suppliers and payers make the shift to value-based care a tenuous course of that’s slowly taking part in out as “extra must be performed,” the American Hospital Affiliation stated earlier this yr.
Kaplan identified the advantages of and dangers related to value-based care — however despite the fact that it stays a steep hill, senior residing suppliers will proceed climbing it in 2025.
