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In 2024, the senior living industry sits at the crossroads of excitement and uncertainty. That was on full display during panel discussions at the recent Senior Housing News reBUILD conference.
On the one hand, the senior living industry is gearing up for a big year in new development. NIC MAP Vision data shows that senior living companies must significantly up their pace of new development and construction if they hope to catch up to demand by 2030. Optimism is swirling around the industry’s ability to make up for lost time in 2025 and beyond as funds for new projects unthaw and companies find partners for growth plans via new development.
On the other hand, there are still some big unknowns about the year ahead. Although senior living companies would like to kick their growth plans into higher gear next year, those plans hinge on sourcing the capital or linking up with the right partners. And that is not to mention the fact that today’s senior living projects need more runway from conception to opening than they did just 5 or 10 years ago.
At the same time, the incoming administration is its own source of uncertainty. President-elect Donald Trump has proposed but not clearly defined some potential big actions including tariffs and mass deportations, and some senior living companies and operators are taking a wait-and-see approach before they determine the effect of those moves on their businesses. As they do so, they are pondering whether these or other trends could derail a big growth year ahead.
Still, on the whole, leaders of companies including Charter Senior Living and Trilogy Health Services believe the coming year is ripe for new growth and seizing opportunities. For instance, Charter CEO Keven Bennema noted during a panel discussion he thinks the new year will contain “a tremendous amount of deals [and] development opportunities, probably more toward mid- to later-2025.”
“I’m hoping that sometime in ‘25, the lenders will start feeling comfortable to really dig into really good projects,” Bennema said this week during a reBUILD panel.
Looking ahead to 2025, I am curious to see how operators react to ongoing uncertainty due to these political and broader economic factors.
Provided that the senior living industry can get back to a quicker pace of growth, I think 2025 could be the year that operators finally make up for lost time with regard to new growth and start to close the supply gap. But the risk I see is that operators underestimate a coming obstacle that would further put the industry behind where it needs to be as the supply-demand imbalance widens.
In this week’s members-only SHN+ Update, I analyze recent commentary from the Senior Housing News reBUILD event in Chicago and offer the following takeaways:
– What operators are looking forward to in 2025
– How operators are evolving to meet the wants and needs of the incoming older adults
– How political implications and other kinds of uncertainty impact operators’ plans for development in the new year
Plenty of optimism regarding year ahead
Among the big takeaways from reBUILD is that senior living operators are fairly optimistic about 2025, even if they are waiting to see what happens in the new year.
For example, Trilogy CEO Leigh Ann Barney is looking forward to the new year given that the baby boomers are about to age into the industry en masse.
“I think we are seeing relief in interest rates, construction costs, even staffing has been … much better across the industry than it was coming out of Covid,” she said during a panel at reBUILD. “So, I’m very positive on it, but I would like to see more growth coming and to have that inventory there for the need that’s coming.”
Trilogy is backed by American Healthcare REIT, which in September acquired the remaining ownership stake of the company for $258 million. The company found ways to develop new communities all throughout recent years thanks to a careful growth strategy centered on the U.S. Midwest.
Trilogy is currently on its fourth community design iteration, and Barney said the company frequently tweaks the communities in its portfolio to make sure they are appealing to incoming customers. For instance, the company has added popular patio home styles at a handful of communities in 2024, with plans to do more.
“When construction does start, you don’t want to go out and just think that you know everything and rush out to do something,” Barney said. “We’ve taken this time where we aren’t building as much to look at our new design, and we’re going to be very consumer-focused, trying to not think that we know all the answers.”
Charter’s Bennema also is optimistic about the year ahead, and he hopes that senior living operators throw open the “floodgates” for growth. Charter similarly develops communities in tertiary and secondary markets, a strategy that takes lots of “homework” but is well worth doing in the end, he said.
“You have to be very thoughtful, and you have to challenge any assumptions you may think you have about various markets, where they used to be and where they could be,” Bennema said.
Other operators that were optimistic about the year ahead included Experience Senior Living. The Colorado-based senior living developer and operator is working on a half-dozen new communities, across multiple brands and price points to attract younger senior living prospects through lifestyle and wellness-based offerings.
Another reason to be optimistic about 2025 is the fact that “there’s a lot of investor interest today in senior housing as a sector,” according to NIC Senior Principal Caroline Clapp. And it’s no secret there is a lot of money still waiting to be deployed in senior living.
“The investor demand is quite strong right now,” Clapp said. “And then development … the equity is there, but how do you get the lenders off the sideline?”
Looking ahead, I too see a reason to be optimistic. Operators throughout the two-day event’s panels told us that they are expecting to grow in the year ahead through various means, and they seem confident they can achieve their plans.
Evolving for the boomers
As senior living companies look to the new year with optimism, they are focused on conceiving a new product for the incoming baby boomer generation.
Even over just the last five years, the demands of the baby boomer generation “has drastically changed,” said Experience Senior Living President Phill Barklow. And “it’s not just the residents themselves,” he added.
“The family members’ needs and expectations have drastically changed. And maybe most importantly, the team members’ expectations have changed,” Barklow said during a reBUILD panel.
Speakers on several panels noted that today’s boomers want wellness services, access to amenities and lifestyle offerings, transportation and ways to live among many different kinds of people.
What boomers need is affordability, from true affordable senior housing to middle-market development.
Though both avenues for growth are not easy, there are likely millions of older adults who will want and need senior living in the years ahead but won’t be able to afford it.
To succeed in expanding affordable senior living, operators have pivoted to repositioning or redevelopment of communities as a less-costly option to bring a more attainable price point option for residents.
One operator taking that route is Felician Services, with the Michigan-based senior living provider converting an unused convent into 77-units of affordable senior housing. It marks the third repositioning project for Felician Services to repurpose existing convents for the Felician Sisters of North America.
LCS Development, part of the LCS family of companies and one of the largest senior living developers in the country, is seeing demand for larger units compared to past trends of smaller, studio units.
“There’s a limited capability for our residents to buy those [larger units],” Executive Vice President and Managing Director of Development at LCS Chuck Murphy said during a reBUILD panel. “We have to be more efficient with that and we have to be super smart about it and that’s where the design function working with the architecture firm is a real key.”
As Innovation Senior Living CEO and Founder Pilar Carvajal puts it, there’s “enormous opportunity” to develop affordable and middle market models. The Florida-based affordable assisted living provider relies on universally-trained workers to reduce staffing costs and seeks partnerships with local organizations to improve programming for residents at the middle-market and affordable price points.
Priority Life Care CFO Ivyonne Byers echoed Carvajal’s push for middle market and affordable growth during a panel on affordability in the middle market.
“The other thing for us is really partnering with owners that really want to push for more of the affordable product as third-party managers and our business is kind of driven by what the owners are doing,” Byers said during the panel.
“We really need to get started,” Carvajal said plainly during reBUILD.
This need for greater affordability in senior living is apparent, but just how senior living operators are able to navigate the myriad challenges remains unclear.
Uncertainty about year ahead despite optimism
As I have stated before, a kind of jittery optimism pervades the senior living industry at the tail-end of 2024. Operators are excited about the road ahead and making up for lost time, but they are nervous about potential obstacles that have yet to fully materialize.
The impact of Trump’s second term remains yet to be seen in senior living, multiple operators said during reBUILD. Operators honed in on two stated plans from the president-elect in particular: Tariffs and the prospect of mass deportations.
Trump has vowed to use the U.S. military to deport undocumented U.S. immigrants, a plan that could affect millions of families across the U.S. Although operators at reBUILD weren’t all that worried about the prospect of their employees being deported, the impact on their families remains to be seen.
“It could be very disruptive to their home life,” Bennema said. “There could be other secondary types of issues created.”
A hardline stance on immigration could also deplete the nation’s service, hospitality and construction staffing pools at a time when the senior living industry sorely needs workers. And even if operators can build new communities, those plans are not whole if they can’t staff them.
Trump has also vowed to enact broad tariffs, though the president-elect has yet to define what he would target or how extensive such tariffs could be. That has caused some concern among senior living experts and operators, who worry about even a small impact to construction timelines or pro formas.
“Anything that would slow down construction is not a good thing for our country,” Barney said
Barney said the “biggest thing” Trilogy would be watching as Trump takes office is the administration’s hard-line stance on immigration, specifically around the threatened mass-deportations of migrant workers.
Operators in the past have spoken of a need to create a more accessible and smoother road for undocumented migrant workers to gain work visas on a path to citizenship.
“In reality, there aren’t enough workers to take care of a lot of the jobs in this country, so how that will play out, that’s probably one of the more concerning ones,” she said. “But again, I think there’s a need and you’re going to see businesses saying there’s a need.”
Amid this uncertainty, Trilogy will continue on its development pace methodically, with the operator adding four to six new developments annually, Barney said.
Clapp pointed out that Trump’s family business is in real estate, and thus she hopes that any tariffs might not affect U.S. real estate as much. But she said she is concerned about any potential actions that impact construction timelines, and the potential for inflation to rear its “ugly head” again in 2024, affecting the Fed’s willingness to lower rates.
That was also the opinion of Ziegler investment bank Senior Housing and Care Managing Director Eric Johnson.
“No one knows what if anything’s going to come in regard to tariffs, or is there going to be significant increases to a lot of materials and things needed for construction and keeping inflation up which is going to affect interest rates,” said Johnson. “I think we don’t have any idea today what that’s going to look like, but that’s my biggest risk I would see that could change the next few years of construction.”
That said, Oppidan Senior Vice President of Development in the Midwest Shannon Rusk noted that the industry was able to weather the first Trump administration’s tariffs on certain materials, such as steel. Looking ahead, she believes the industry must simply keep finding new and creative ways to develop new communities, given the demand wave just about to crest.
“Be bold and look at the numbers,” Rusk said.
The big challenge for senior living developers like Oppidan right now is the availability of capital for new projects, she added. And Clapp noted during the same panel that “the equity is ready to go, but the lenders need to come off the sidelines.”
Regulations present another potential point of uncertainty regarding the year ahead. For example, Experience Senior Living, has six new projects in the works at varying stages of development, dealing with changing regulations “every single day” from the outgoing administration of President Joe Biden in the last four years, according to Barklow.
“Hopefully there will be more clarity and that’s really all we can hope for,” Barklow said during reBUILD when asked about the impact of a new Trump administration.
Even amid the uncertainty, optimism remains.
I sometimes have conversations with companies that weathered the Great Financial Crisis in 2008 and the years that followed. What they often tell me is that they wish they had acted with more intention and urgency during that period, as they would have been reaping bigger windfalls by now.
At the end of the day, I agree with Rusk and think that senior living companies must keep on with their plans to innovate and evolve for the boomers ahead, or they risk missing out in a similar fashion. Although uncertainty presents a big risk, I think she made a very good point when she said fear of failure is itself perhaps an even greater risk given the demand upside ahead in the next decade. And the clock is ticking.
“As a developer, I’m not going to be developing in 10 years. I’m going to be done in five,” she said. “I’m going to reap the benefits and get out. So waiting is not a game that developers play.”