Seniors housing occupancy levels dropped both sequentially and year over year, but new development continues.
While it did not come as much of a surprise, the recently reported occupancy trends from NIC MAP were certainly disheartening. For occupancy at stabilized assisted living communities in the top 100 markets to drop 70 basis points from the previous quarter, and 117 basis points from the year-ago quarter, to 87.9%, it just makes us wonder why there is still so much new development in the ground, and in planning.
Everyone thinks they have a better mouse trap, that their building is better, their staff will be better, the programs better….I could go on. The reality, however, is that it is rarely true. And when occupancy levels steadily decline, as they have been since the beginning of 2015, budgets get cut, necessary wage increases get postponed, and corners get cut. It is hard not to, when pressure on census is combined with pressure on rates.
In the top 31 markets, assisted living construction as a percent of existing inventory was 9.0% in the first quarter. These are the markets that have been blamed for most of the overdevelopment, and it looks like the beat, or the shovel, goes on.
Your commentary on senior living growth is always authentic and transparent. Your mouse trap analogy is spot-on. What if it’s simply the management? As a turnaround CEO (now a Managing Partner of a turnaround company), I’ve always found leadership is the key. It’s difficult to be focused in regional strategy, growth, acquisitions, refis, etc. in an environment when your foundation is shaky.
As an example, in February BKD announced their new CEO and stated they were planning to hold and reinvest inside their teams. In April, a $75M purchase was announced on a 317-unit senior community. Maybe it was a great deal and part of the HCP partnership, and maybe BKD is too reliant on their regional team to develop strategy in their under-performing communities.
In my view, if senior housing wants to see consistent gains they need to invest in their management team and understand that leadership management is different than operations.
Well said Amber, and it is both, leadership management and operations management. They have to go together for success.