Senior-Housing Operators Put Safety First

Increases in operating costs and staffing issues are testing investors’ mettle.

Senior housing emerged from the Great Recession a mature industry with definable metrics and favorable rates of return over several decades. So, while the coronavirus pandemic presents a number of operational challenges, the outlook for investors remains positive as a long play, experts say.


“Look at the demographics and the appetite for new product offerings that will include wellness programs—and I don’t mean just a 1,000-square-foot wellness room,” said Mel Gamzon, principal at Senior Housing Global Advisors. “We’ll see entire development and operating platforms that are going to be dealing with wellness, fitness, preventive health maintenance and proactive aging.”

Since January 2018, Brookdale Senior Living has completed more than 650 expansion, renovation and redesign projects across the country, including Brookdale Chanate in Santa Rosa, CA. Image courtesy of Brookdale Senior Living.

For now, the primary objective of owner-operators is to protect the residents and to ensure staff has all the personal protection equipment they need. Move-ins have been halted, and in-person tours have been replaced by virtual tours. Best practices also include no visitors and no common dining.

Source: Argentum

“There is a lot of cost associated with technology marketing and telehealth,” added Gamzon, who anticipates a disruption in cash flow and staffing issues for the next six to nine months. “The cost of COVID-19 is in the fear of transmission. Our industry is losing some staffing. The good news is we’re not firing people.”

Bonuses and other incentives are being explored as ways to retain talent, according to Stephanie Anglin, partner at Senior Housing Analytics.

During the National Investment Center for Senior Housing’s 1Q20 data release webinar, NIC reported that overall senior housing occupancies have been flat over the last few years and within the largest metro areas. However, this figure varies from property to property.

Source: Argentum

“They also said construction starts slowed in the first quarter and they expect further decline,” added Anglin. “I imagine there could be back orders. Those under construction could face delays with getting what they need. Municipalities may not be doing inspections or permits at this time.”

On the other hand, there should be plenty of value-add acquisition opportunities.

Sector Insights rotates among market rate/luxury housing, workforce housing, low-income housing, student housing, senior housing and mixed-use.

Read the June 2020 issue of MHN.

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