Seniors Housing is Not About the Boomers

CHICAGO-The problem with the senior housing industry, says Peter Linneman, the Albert Sussman professor of real estate at Wharton, chairman of many investment consultancies and noted author – is that even he doesn’t understand it. The newer niche industry lags decades or more behind in its reporting data, and, in order to encourage investors, needs to be more transparent in how it operates, he said. He made these observations speaking as the keynote at the National Investment Center for the Seniors Housing & Care Industry’s Western Regional Symposium this morning.

He also said that the industry’s main message, “The Baby Boomers are going to need seniors housing soon,” is incorrect. “The average age of the Boomers is 54 years old,” Linneman says. “You’re not going to see a Boomer impact in this industry for at least 15-20 years.”

Bob Kramer, president of NIC, said at a press briefing after Linneman’s presentation, that he agrees with the economist. He said the average age of residents at independent living and assisted living housing has been late 70s to mid 80s. “The way the Boomers right now are involved in seniors housing has been in visiting the locations with their parents,” he said. “The Boomers will have a strong impact on this industry, but that’s longer down the road.”

Linneman said the message needs to change to attract customers. “Nobody wants to think of the place where they’re going to spend the last few years of their life,” he said. “I think the message should focus on health issues, from the social aspect, fitness centers, and other benefits.”

Kramer said in the future, that’s likely where the industry is heading. “You’re going to see an entirely different industry two decades from now,” he said. “There will still be empty-nesters, those who want to stay shut-in. But there will be new housing, a resort-type housing, that will capitalize on this need, that focuses on health and socialization.”

Some data that has been collected, mostly by NIC, shows that the peak construction trends for seniors housing hit in the mid-1980s and mid-90s, and that the industry is now in a downward trough. “We’ve still got some in the pipeline, but our newest quarterly reports are showing a dramatic slowdown in new development.”

This period of softness for the industry should give it time to rework its image and improve its data and reporting, and appeal to the newer generation of seniors – and investors, Linneman said. “You’re not going to have lenders work with you unless they understand what you do, so keep it simple,” he says.

For example, he referred to the many different types of product in the industry (independent care, assisted living, memory care, etc.) compared with the type of care offered, and how they are too often poorly interchanged, to the incomprehension of investors. “Stop focusing on “the Boomers are getting old,” which I’ve seen in every presentation about this industry, and decide what metrics matter most to the investors and give it to them, whether it be RevPar growth, units under construction as a percentage of inventory, or unit percentage rate. You need to demystify your industry,” Linneman said.