By Steve Moran
Predicting the future is purely a fool's business. The last time I tried it was in early January, 2013. You can check out the predictions and decide how well I did. These are not “I think the stock market will be..." kind of predictions, but rather trends I see in the industry and economy.
Maybe if I am brave enough (or right enough) I will give myself a report card a year from now.
My predictions for Senior Living for 2017:
Occupancy -- This one does not take much brain power I am thinking . . . we will see some continued softening with occupancy. There are more units coming online and we are still a decade from the “big bubble”. The good news is that because of the sameness in the marketplace thoughtful operators will be able to beat both the local and national markets.
Failures -- This will be the year we start to see a few more organizations bite the dust. The communities will be picked up at relatively bargain prices by stronger moderate sized operators.
In particular, I worry about some of the freestanding memory care providers. It was once thought -- though never by me -- that it was impossible to build too many memory care units. The market is demonstrating this is not true.
People -- Sometimes fairly and sometimes unfairly when communities and companies fail to meet performance goals, cultures suffer and when cultures suffer heads roll. Sometimes when a culture needs a shake-up even great people lose their jobs. We still have a fairly weak pool of leaders. I continue to be hopeful that individual companies and the industry as a whole will get serious about leadership.
I think every senior living publisher would tell you privately, though maybe not publically, that they are appalled at how few senior living leaders actually consume information outside what gets fed to them by their company. This is a sign they are so busy being tactical they do not spend time or energy being strategic. This is really bad. It leads to people doing the same thing over and over again hoping for different results.
REITS -- This will not be a huge factor this year, but we are going to start seeing some REITS (maybe all senior living REITS) struggle with operators that are not able to meet all of their covenants. As a result, we will see some shuffling of operators. My guess is that on the first round of shuffling, there will not be a lot of lease rate concessions, but in the next couple of years that will happen.
Economic Impacts -- With the Trump presidency, if he is able to stay true to his promises, we will see corporate tax rates reduced and some heavy pressure for large companies (not senior living) to repatriate their offshore profits. This sounds good on the surface but what will likely happen is that more cash will flow into an economy that already has more investable dollars than there are good places to invest.
I am thinking this will start an inflationary move north, which will in turn increase interest rates. It is really hard to know how this will impact senior living. It could mean happy times in that the massive per door acquisition prices will look like great bargains. On the other hand, seniors tend to have low-risk investments and they may not be able to afford inflation-driven price increases.
Independent Living (Watch Out Assisted Living) -- I believe as prices for all levels of senior living continue to move north more and more seniors will opt for independent living with decoupled services as a way to control costs.
Board & Care -- As a business sector we all but pretend that board & care senior living does not exist or at least that it will not have much impact on larger operators. They are sneaking in provision of a true homelike experience. Not all or even most, but a noticeable number of them are charging nearly as much as enterprise senior living communities charge and because of their small size and low overhead they are offering mindblowing levels of personal service that looks and feels a lot more like the home the senior just left.
There is another cohort that is filling the need for a more modest pricing. They are having an impact and that impact will increase.
That's it. Thoughts?