Senior Housing: Top Ten Senior Housing Trends For 2011

Austerity was the most searched word on the Merriam-Webster online dictionary during 2010. In case you’ve been living under a rock the past two years, the word means ‘enforced or extreme economy’. Quite different than luxury or other indulgent phrases that led up to the recession of the last few years. As you peruse this year’s trends in senior housing, keep the word ‘austerity’ in mind but contemplate a new bifurcated mindset: one for the wealthy, well prepared and another for everyone else. This bifurcation in the 55+ demographic will be more pronounced during the next two years but the world will have to deal with the larger majority, which we feel to be in the “everybody else” category. Housing for the masses may not be as sexy as luxury housing on Lake Shore Drive in Chicago or a CCRC in Manhattan, but it’s more critical to the future of aging in America and around the world. If austerity was the word for 2010, let’s hope the word that defines 2011 is pragmatism. Now for our look at senior housing trends in 2011….

1. Economics 101 – Supply Decreases, Demand Increases….News Flash: Prices will go up for Independent Living, Assisted Living and Nursing Care

Declining supply and increased demand based upon demographics as well as higher labor and material costs will start to drive senior housing prices up in 2011 at a faster rate. As supply has remained relatively flat during the past few years with a lack of new construction and rehab in facilities and communities, the natural growth of the elderly population will provide a steady stream of increased demand. We think the real wake call on supply realities and increase in prices will come in 2012. The question is at what pace and rise in prices can be passed along until customers opt to remain in place despite their needs?

Choices of venue for senior housing will take greater importance as seniors will need to exist on fixed incomes. Since senior housing choices are predominantly a local decision driven by economics, where will the price point be to avoid sticker shock and where?

The economics of the senior housing solution will continue to further expand the notion of multigenerational and small group housing in the coming year. See our architectural comments for more insight on multi-gen housing.

2. 3 – R’s of Senior Housing – Rehab, Renovate, Repurpose

New home construction and new senior living projects (independent living, assisted living, nursing homes, CCRCs) will slowly start to accelerate during the second half 2011. Home renovation is expected to rise significant in 2011 according to the Harvard Joint Center for Housing Studies and have double digit growth during the year. We feel this is right on par with conversations and observations we’ve had with various industry participants. The upfront costs for renovating a single family home or installing a monitoring system may be more palatable if it allows a consumer to defer entry into assisted or skilled care for a certain period of time. While the decision is based on a probable return on investment if they can accurately predict how much longer they would age in place. The most difficult part is calculating the intangible value of happiness of remaining in the local home and community for a longer period of time. We can see it now, if you rehab your kitchen to be senior friendly, will you get 70% of your money back at the time of resale?

3. Technology – Monitoring Networks, Apps, Devices and Systems Integrators

Ladies and Gentlemen, start your monitoring …..through gadgets, apps, networks and the cloud! During 2010, a trickle of vendors released new monitoring systems and delivery options. The flood gates are going to bust open as the economy heals and companies are looking to invest and expand into high growth markets. Look for continued announcements and product offerings from old and new technology companies as well as acquisitions and roll ups of related products and services for the senior care market. Some products will be “me too” products that will provide additional market choices but few, real new features. Who will win? We’re betting on well designed products that are simple without feature overload at reasonable prices.

One of the areas that will start to accelerate in 2011 is systems integrators working in local markets to deploy various monitoring systems that employ industry standards. If vendors work within established standards, the costs for deployment and support have a higher probability of being adopted faster than those that are built upon proprietary technology. These systems integrators will need to provide better service than the Geek Squad but also know about concepts on senior living design and general contracting besides the technical nature of deployment of these networks. What are we forgetting? The most important features: selling and servicing seniors and their children. How many local GC’s are ready for this? If you said very little, you’re probably being generous. The costs of a design and tech make-over may make your stomach turn at first but if amortized over an additional 5 years in the home versus assisted or skilled care, it will seem like a bargain. In a society of instant gratification, that will be a hard sell.

4. Campus Extensions and Home Healthcare

Many CCRCs, assisted living facilities and even nursing homes have started rolling out extended campus models as a means to augment their current revenues as well as provide a consistent marketing pipeline for new residents who are comfortable in their campus settings. The concept of extended campus will begin to gain traction as companies look to either to enter this realm with build or buy decisions with home care providers. Given the highly fragmented market of in-home senior care providers, a localized roll up strategy may make sense in some cases dependent upon local operations and reputation. Home healthcare and senior care franchises fall into this spectrum and were one of the most prolific franchise stories during 2010.

5. Finance & Capital Markets – Chicken or the Egg

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