What Is Driving Growth in Senior Housing?
- Aug 03, 2021
At the end of 2020, senior housing occupancy was at historic lows, but as we slowly return to a sense of normalcy, demand for senior living communities continues to improve.
“As the world begins to rebound, so does the senior living industry—with move-ins into senior living communities between March and June reaching the highest rates we’ve ever experienced in our history,” John Reinsma, managing director at Confluent Senior Living, told Multi-Housing News.
In the interview below, Reinsma talks about the ups and downs the senior housing industry has experienced in the past 18 months, and dives into trends and challenges that will shape the sector in the second half of 2021 and beyond.
How would you describe the current state of the senior housing industry?
Reinsma: While we have entered a phase of recovery in 2021, the industry still faces challenges—specifically regarding the perception issues of what qualifies as senior housing, as there remains a level of confusion regarding the difference between independent living, assisted living, skilled nursing facilities and hospice. The general public’s understanding of these distinctions is improving, but more education can be done to further clarify the true impact of senior living asset class performance and the associated impact on development.
On a related note, the industry is still working its way back to a more stable equilibrium when it comes to supply and demand. For instance, many senior living projects ground to a halt last year as construction debt became nonexistent and investors expressed concern about viability.
Now, as the world and economy reopen, many players in the industry will need to work to find ways to ensure their projects will be economically viable. During this time, Confluent Senior Living became heavily invested in discovering ways in which we could assist our operators through the reevaluation of budgets, identification of staffing solutions, and resetting of expectations to effectively navigate through the crisis and ensure everyone was well supported.
If we learned anything in 2020, we know that a path forward may not always be clear, but placing an investment in strategic, collaborative plans with our partners has the potential to tee businesses up for success in the long run.
What can you tell us about demand for senior living properties across the country nowadays?
Reinsma: In the wake of COVID-19, senior living communities have been at the lowest occupancy levels since 2005, due to safety concerns.
Today, the industry is faced with pent-up demand and this demand will continue its trajectory in the near future. After that pent-up demand has been served, we believe the lease-up trajectory will return to pre-pandemic velocity.
How has the health crisis changed your approach to developing senior housing properties?
Reinsma: Heading into COVID-19, Confluent Senior Living had already been infusing new technology and design standards into its communities for further enhancements. To effectively address the hurdles presented by the pandemic and capture any incoming demand, Confluent Senior Living and our development partners such as MorningStar Senior Living curated and implemented Whole Health Standard for our nationwide senior living developments. This innovative plan ensures healthy spaces for residents, staff and visitors, both physically and mentally.
We’ve introduced cutting-edge technologies into our designs and implemented the necessary changes to existing projects, new projects and those that were under construction. The establishment of this new approach to development in senior living projects aims to encourage fellow industry thought leaders to evaluate technology solutions that enhance wellness and safety, while emphasizing health care, hospitality and comfort.
What are some of the health- and wellness-conscious design features you’re implementing across your senior housing portfolio?
Reinsma: The Confluent Senior Living team is incorporating design and technology such as far-UVC light field—to help reduce the spread of airborne-mediated microbial diseases—and antimicrobial countertops and surfaces. We have also bolstered our ability to offer telehealth accessibility for residents in the buildings. With the latest advancements promoting increasingly safe environments for both residents and staff, the communities see lower expenses and margin maintenance.
In addition to the more technological updates, we’ve made changes to the living spaces to promote mental wellness. For example, we’ve worked with our operating partners to focus on more outdoor spaces for dining, balconies, patios and indoor-outdoor recreational space wherever possible. These changes have already been very well received by residents and their loved ones.
Tell us about the senior housing projects you’re currently working on. What are some of the challenges of implementing design changes caused by the pandemic?
Reinsma: We’ve always viewed our operators as partners, and they’ve had a critical process to ensure safety for residents and team members. Within the past six months, Confluent Senior Living—with the support and collaboration of our operators like MorningStar Senior Living and Harbor Retirement Associates—has broken ground on three senior living communities in Denver; Mission Viejo, Calif., and Shaker Heights, Ohio.
Based on the challenges we’ve faced in the past year, such as the changes in commodity pricing, these are the three communities that we will execute upon this year.
Confluent and our operator partners at MorningStar introduced the MorningStar at Observatory Park community in Denver as one of the newest senior living communities designed intentionally to establish a new Whole Health Standard for the industry. Each of our projects to break ground moving forward has adopted and will continue to incorporate the design methods we’ve established within the parameters of this new, industrywide standard.
While some projects have shifted in timing or had been placed on hold in 2020, we remain steadfast in our mission to develop quality communities as we emerge from the pandemic and we start to experience some relief. As we look ahead, Confluent Senior Living is more bullish on senior living than ever and we look forward to new contracts and ventures in 2022 and beyond.
Why are you so bullish on the sector’s growth?
Reinsma: There is a major demographic wave on its way for the senior living industry. We are just 2 to 3 years away from the oldest Baby Boomers aging into senior housing accommodations and the 85-plus population in the U.S. will increase 177 percent over the next 30 years. This incoming demand by residents to move into senior living facilities is very real and something we will likely experience for the foreseeable future.
Meanwhile, an unprecedented amount of capital—an estimated $6 billion to $8 billion—is sitting on the sidelines, ready to be dedicated to this incoming demand. In just the next five years, investors will be vying for partnerships with industry leaders in developing, owning and selling senior living communities.
With this wave of incoming demand, coupled with the “new normal” in health and safety precautions after last year, our goal is to lead the pack with a more widespread implementation of our Whole Health Standard and usher the industry into a more innovative, technologically driven future that keeps health and wellness top of mind.
The more developers and operators in the industry can adopt these solutions, the more they will set themselves apart from antiquated and obsolete products. We established this new standard for our teams to evolve with time, trends and demographic preferences. An approach that prioritizes residents’ health and wellness through the latest in healthy building technologies will most effectively establish a new road map for the senior living industry moving forward.