The last three decades in the senior living industry have seen several major recessions and breaches of confidence, but all of them also have provided an opportunity for the sector to come back stronger than ever, and the COVID-19 pandemic is no exception.
That’s according to speakers at a National Investment Center for Seniors Housing & Care “Leadership Huddle” webinar last week.
“No one has lost confidence on the benefits of living in a senior housing community, but what they’ve been struggling to reconcile is what their life would be like if they moved into a community today,” said Bill Pettit, president of The R.D. Merrill Co. “That’s what the efficacy of these vaccines is beginning to address, and I’m more optimistic now than I was six months ago about when we might recover.”
Several speakers suggested that it likely would be at least another 18 months to get back to a pre-COVID level of net operating income for most senior living operators.
“We really need to see some combination of occupancy recovery and even growth, as well as some normalization of expenses before that happens,” said Trace Wilson, executive director at PGIM Real Estate. Others, however, noted that recovery is nearly impossible to predict on a national level.
“Some assets in some markets have already come back,” noted Brian Sunday, managing director of AEW Capital Management. “The markets that were struggling pre-COVID — that had supply issues and were weak in fundamentals — are going to take a lot longer to come back than those in markets that did not have these same types of issues.”
Sunday added, however, that the firm’s overall view on the investment case for senior living hasn’t changed.
“With demographics, and with new developments slowing down amid the pandemic, senior housing has a good long-term view,” he said. “As things open up we’ll see that confidence come back.”
Pettit agreed, adding that once investors figure out where the opportunity will be to structure profits coming out of the pandemic, the industry has a “great long run ahead of it.”
“I believe investors will make more money in this industry in the next decade than they have in the last,” he concluded.
