One positive to the otherwise devastating effects of the COVID-19 pandemic on the senior housing industry has been that it appears to be helping to more favorable align future supply and demand fundamentals, according to an article Wednesday on GlobeSt.
Before COVID-19, construction starts had begun to slow due to oversupply, increasing land costs, increasing operating and construction costs, and some widening in credit spreads, the media outlet reported. That’s all changing as a result of the pandemic, said Kevin Maddron, CFO of Foundry Commercial.
“A slowdown in new construction costs, coupled with an improving labor market and an increasing older population, will create significant investment opportunities in the future,” Madron told GlobeSt.com.
His comments echo what National Investment Center for Seniors Housing & Care Chief Economist Beth Burnham Mace told McKnight’s Senior Living in October.
“If you figure a start takes 18 months to two years to turn into a building that can open, the weak starts activity in both [assisted living] and [independent living] suggests that that supply challenge that we’ve seen will start to certainly dissipate as we go into 2021 and 2022,” assuming that the country is not in crisis due to the virus by that point, she said at the time, noting the pandemic’s “silver lining” for the industry. “Some of those low occupancy rates of today will benefit from the slow-down in construction starts presently and should benefit from pent-up demand and greater demand projections,” Mace added.
Wednesday’s GlobeSt article also pointed to a handful of additional “subtle shifts” underway that suggest that senior housing is on the cusp of a turning point from its pandemic lows.
Patricia Will, co-founder and CEO of Belmont Village Senior Living, told GlobeSt that she has seen much pent-up demand on the part of consumers. She also noted that many of the changes made by operators as a result of the pandemic, such as major bandwidth improvements, will improve older adults’ social engagement activity even after the virus is brought under control.
Additionally, some real estate experts are even noticing new institutions and other investors beginning to show interest in senior housing as they move away from other sectors that have been hit even harder by the pandemic.
“There’s a lot of new capital that’s reallocating from theaters and retail centers, [and] convention hotels into the space,” said Lisa Widmier, executive vice president of CBRE’s Senior Housing Capital Markets practice, on a recent CBRE The Weekly Take podcast. “And that’s not only just for domestic capital, but we’re seeing an uptick in global interest in the US senior housing market. So we’re pretty optimistic about 2021.”