June 18, 2019
Connect Healthcare chatted with Ken Carriero, national director and senior vice president of Colliers International’s National Seniors Housing Group. Read on for his insights into the seniors housing segment.
CONNECT HEALTHCARE: How would you characterize the amount of seniors housing development occurring across the nation?
CARRIERO: Construction for assisted living has been trending lower for the past several quarters. There are some concerns about overdevelopment. However, with 10,000 people turning 65 every day, I feel confident that what is currently being developed will be absorbed at some point in the near future.
CONNECT HEALTHCARE: What type of seniors housing is coming out of the ground?
CARRIERO: Most of the development is in the assisted living/memory care space. Projects today have more of resort-type feel rather than institutional. Adult children who are making the decision to move their parent(s) into an assisted living facility want them to have every possible amenity. Developers and owner/operators are looking for higher-paying residents, and state-of-the-art amenities draw private pay residents to their facilities. Few facilities are being built with the Medicaid resident in mind.
CONNECT MEDIA: Which markets are booming for seniors housing?
CARRIERO: Markets with a low cost of living and nice weather are experiencing an influx of older residents. We see a lot of growth in Arizona and Nevada, as well as Tennessee, particularly the Nashville area, the Carolinas, and South Texas.
CONNECT MEDIA: Increasing construction costs are impacting every part of the commercial real estate industry. How is the seniors housing sector responding to increased material costs and labor shortages?
CARRIERO: We have noticed an increase in expenses due to materials and labor. In the Midwest, for example, projects have experienced close to 20% increases. In major markets, labor costs have taken a bigger bite out of the development budget. Developers are increasingly focused on whether the demographics can support higher rates required by increased building costs.
CONNECT MEDIA: What kind of appetite/demand are you seeing for existing properties/facilities to be repurposed into seniors housing?
CARRIERO: The appetite for dark hotels and dark mall anchors is growing. Turning a hotel into seniors housing makes a lot of sense. It’s less expensive in most cases, and the infrastructure is already in place. They’re set up perfectly with a dining room and elevators, not to mention amenities. If some of the newer facilities are designed to feel like a resort/hotel, then why not buy a hotel that already exists? Anchor spaces, like a vacant Sears, are appealing because of their convenience. Adult children can visit mom or dad and take them out to lunch and an afternoon of shopping without the hassle of transportation.
CONNECT MEDIA: Who’s investing in seniors housing today?
CARRIERO: We’re not seeing a lot of new players investing in these assets. REITs and private institutions, along with owner/operators, continue to be active. And, we’re seeing a small amount of money flowing from Europe. Foreign investors with experience in seniors housing in Germany, France, and the United Kingdom are interested in the United States.
For questions, comments or concerns, please contact Jennifer Duell Popovec