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This week, senior living industry executives and leaders gathered for the annual NIC Fall Conference, which took place this year in Washington, D.C. Although last year’s conference was somewhat gloom and doom, this year felt more optimistic, and several operators discussed with me their plans to prepare for the industry’s next chapter of growth and evolution.
Leaders of senior living companies including Experience Senior Living, Discovery Senior Living, Treplus Communities, Solera Senior Living and Avenue Development are plotting their next round of growth with an eye on the industry’s future customers. As they do so, they are well aware of trends that could derail or at least change their plans, and are wary of jumping the gun.
In this week’s exclusive, subscribers-only SHN+ Update, I offer key takeaways and analysis from sessions and my meetings during the NIC conference, including:
– How senior living operators are preparing to grow in 2025 and beyond
– New ideas and concepts that are propelling senior living into the future
– How senior living’s “three-body problem” could create new challenges and opportunities
‘The shovels come out’ in 2025
Growth has remained relatively slow in senior living due to a handful of difficulties, including getting financing for M&A or new development. But with September’s much-anticipated interest rate cuts, more senior living companies are thinking about – and sharing – their plans for the next growth cycle.
Discovery Senior Living CEO Richard Hutchinson told me during NIC that he believes 2025 will be “the year the shovels come out.” Discovery Senior Living is planning to grow next year by continuing to stand up regional management companies to execute on further horizontal growth.
As it has been stated before, the senior living industry faces a $275 billion development “supply gap” in the next six years, with plenty of demand ahead. But despite the obvious growth opportunities, Hutchinson said operators must be wary of jumping out of the starting block too early or risk over-extending on expansion initiatives.
“Everybody needs to be careful,” Hutchinson told me. “We need a smart delivery of this supply and be smart in entering new markets, not just dumping thousands of units in-market.”
Hutchinson told me he’d be watching key indicators for gauging the health and pace of senior living development in 2025, including the pace of single-family home sales and single-family construction starts.
“If the pro forma is working, and you convince LP [limited partner] capital to come in the space, and if they convince a lot of people to move too quickly, we could end up with a bunch of supply that all of a sudden has a little bit of desperation on it,” Hutchinson told me.
I can see why he would signal caution amid a time of optimism for the industry’s future—as multifamily vacancy rates have plateaued and single-family construction saw 37% fewer starts in the third quarter compared to 2023, and single-family home sales dipped 2.8% year-over-year.
Many senior living providers rely on healthy single-family home sales to drive move-ins as real estate is the most common equity held by older adults looking to enter a community.
This cautious approach is something I think all senior living providers must heed—or potentially regret fighting never-ending lease-up battles in over-supplied sub-markets going forward. But whether or not they listen remains to be seen, and the recent Fed action could change the tide.
On the flip side, there’s only so long developers and operators can wait in pursuing new growth as they see their competitors jump off the bench and into the arena. That is especially true given that the time to complete a new construction project has risen to 29 months in 2023, up from 21 months in 2017, according to recent NIC data.
“[After] a couple of years when nearly everything’s been acquired and nothing’s been built, we can’t get projects designed and built in a year,” Treplus CEO Jane Arthur-Roslovic told me.
Treplus is forging ahead with a growth strategy that includes one active adult community started this year, with three active adult communities slated for 2025. But she added that she’s still “a little gun shy” about fast growth as many developers and capital partners remain on the sidelines heading into next year.
Some in the space are pushing new development in an effort to be ahead of the supply-demand imbalance and be the first to capitalize on getting new projects to market. Experience Senior Living has two projects planned in the D.C. area, one that took 6 to 10 years to bring out of the ground, and three additional projects set to break ground in “the next six months,” President Phill Barklow told me during the conference.
“We’re focused on the customer of the future and moving our way up the funnel to younger, more active residents,” Barklow said during the conference.
But where I think growth will continue to come easier for operators in the short-term will be in the form of securing new communities under management contracts. Take Denver, Colorado-based Solera Senior Living. The growing operator will finish 2024 having added seven communities in such arrangements, bringing its total community count to 15.
“[2025] will be a similar type of growth for us and I think it’s because the window is still pretty compelling,” Solera CEO Adam Kaplan told me during the conference. “On development, we’re waiting for the capital to flow back—we want to be cautious.”
As senior living companies embark on new growth plans, they are also readying new models for future customers. That includes active adult operators, who are deploying “jack-of-all-trades” active adult strategies for the future.
One such company in that sector is Avenue Development, which is moving ahead with Viva Bene, a new brand slated to be operated by Greystar that marries active adult and access to health care services.
The first Viva Bene community is currently coming together near St. Louis, with an opening date just months away. The brand is based on a belief that the incoming generation of older adults won’t just want a stylish and affordable place to live, but ways to stay well for longer.
But according to Avenue Principal and Co-Founder Michael Mattingly, the challenge won’t only be coming up with new ideas for a new generation of residents – it will also lie in execution.
“If you can’t understand your market and execute, it will be a tough break,” Mattingly told SHN during an interview at NIC.
Senior living’s ‘three-body problem’ still looms large
While senior living providers will have to understand their markets and time their growth shrewdly in order to succeed, the conference also reinforced that they have a slew of other challenges to confront.
During this week’s conference, Dianne Munevar, Vice President of Health Care Strategy at NORC outlined senior living’s “three-body problem” of affordability, care limitations and workforce challenges.
While these problems remain daunting, Munevar said these conditions “could be solved with a senior housing and care solution” by capitalizing on the ability to reduce hospitalizations and access to primary care in an evolving health care ecosystem in which operators receive financial compensation through value-based care structures.
This gradual pivot to value-based care must be heard by all senior living providers looking to deliver quality care, differentiate within a competitive market, and improve top-line revenue.
But this transition to value-based structures will require creativity, failure of concepts, and courage to bring senior living forward for the future.
That is to say, the value-based care opportunity is creating excitement and spurring innovation in the sector, but providers are also still cautious about moving into value-based models, perhaps to a fault. As with expanding their portfolios, providers need to make careful calculations about their value-based care strategies and then need to act boldly when the time comes.
At NIC, it was clear that the time for a lot more action is drawing nearer, creating a sense of urgency and excitement, as well as the jitters that come when the stakes are high and the rewards – and risks – are significant.