The senior living industry is gearing up for significant shifts as it moves toward 2025, a period anticipated to see an influx of demand driven by the ageing baby boomer generation. As the oldest members of this demographic approach the average age for senior living facilities, the industry faces both opportunities and challenges amid rising demand.
Currently, the senior living sector is recording a positive growth trajectory, although hurdles remain in the path of expanding facilities. An analysis by the National Investment Center for Seniors Housing & Care (NIC) suggests that while the average occupancy rate is expected to reach 92% by the end of 2026, the industry must contend with obstacles that could impede new project development.
Omar Zahraoui, a senior principal at NIC, highlighted the resilience of the industry during the past four years marked by the Covid-19 pandemic, emphasising that this adaptability will play a crucial role in navigating the current challenges. Speaking to Senior Housing News, Zahraoui remarked, “A natural alignment between demand and the industry’s mission is paving the way for growth.” Despite anticipated strong demand, there are concerns regarding the ability to construct sufficient new communities to meet the needs of incoming residents.
Currently, data indicates that average occupancy rates in primary markets are at 86.5%, only slightly below levels observed prior to the pandemic. The NIC has projected that the industry will require over 600,000 new units by 2030 to satisfy middle-market demand, illustrating the necessity of scaling up operations. Caroline Clapp, another senior principal at NIC, noted that while investor demand is vigorous, there are uncertainties that must be addressed to unlock more development opportunities. “Development, I think just if we can get past some uncertainty in the market, it could help," Clapp said during a recent conference.
Among industry leaders, there is cautious optimism regarding growth in the upcoming year. Keven Bennema, CEO of Charter Senior Living, expressed hope that 2025 could be a pivotal year for new growth, suggesting that a significant number of development opportunities may emerge as market conditions shift.
Dan Williams, CEO of Onelife Senior Living, offered a similar perspective, indicating that cap rates and community valuations may stabilise in 2025, potentially facilitating further expansions. Meanwhile, he noted the importance of maintaining high standards in service and amenities, akin to those found in hotels, to attract residents.
Despite the prevailing optimism, the industry is also grappling with potential economic challenges, such as looming tariffs and fluctuations in the cost of building materials. Such economic policies could hinder construction and inflate project costs, posing additional hurdles for senior living operators.
Further complicating the landscape is the ongoing need for investment in technology and infrastructure. Brandon Ribar, CEO of Sonida Senior Living, pointed to the necessity for operators to invest in their future to remain competitive, stating, “I think operators that may not have that flexibility will struggle if they’re so focused on just every dollar that they have available to spend.”
As discussions continue among industry experts, there is general consensus that adaptability and strategic investment will be key drivers of success in the evolving senior living market. Greg Colon, Chief Operating Officer of Erickson Senior Living, highlighted the need for continued adaptation to meet the evolving expectations of today’s seniors. He posited that embracing change in 2025 will be essential for the industry's future viability.
With the potential for increased demand and investment opportunities, the senior living industry stands at a crossroads as it approaches 2025, poised to adapt to an ever-changing landscape while acknowledging the challenges that lie ahead.
Source: Noah Wire Services