Assisted living most popular for development but construction remains low
LOS ANGELES: The senior housing planning pipeline holds a “sizable” potential future supply of new units, but the majority of those planned units are in the pre-planning or planning stages, with only 6% advancing to the bidding or final planning stages, according to a new report from the National Investment Center for Seniors Housing & Care.
The report from NIC Analytics examined the senior housing pipeline — projects that haven’t yet broken ground but are in the pre-planning, planning, bidding or final planning stages. It now sits at 88,283 across 214 NIC MAP markets. New property development represented 95% of the planned units, while 5% were existing property modifications.
At its recent fall conference, NIC identified accelerating community development to improve consumer access as one of the three major challenges facing the senior living industry. As occupancy approaches a record-high 90% in many markets, inventory growth is less than 1% annually.
The industry needs 576,000 additional units by 2030 to meet consumer demand, but construction starts account for only 10,000 units annually, according to NIC MAP.
Developers are facing a host of challenges in bringing projects in the pipeline to fruition, including higher construction and labor costs, financing challenges, regulatory requirements and zoning barriers. Compounding the situation is development timelines — entitlements, approvals and construction can take years.
In a blog post, NIC Senior Principal Omar Zahraoui said there are two conversions worth watching — the conversion of planned projects into construction starts, and the conversion of strong occupancy and pricing into operating margins.
“Those two dynamics will tell us a lot about where senior housing goes next, from both an operating and investment perspective,” Zahraoui wrote.
The potential pipeline
Of the total planned units, 95% were in pre-planing or planning stages, while just 6% reached the bidding or final planning stage, according to the report. The planning pipeline also was more than three times the size of the construction pipeline, according to the report.
Assisted living communities accounted for the largest share of the pipeline, representing 60% of planned units. It was followed by continuing care retirement communities (24%) and independent living communities (16%). There also is a coastal concentration, with the Southeast (23%), Mid-Atlantic (19%), Pacific (18%) and Northeast (17%) regions collectively accounting for 77% of planned units.
Among the 15,595 planned units with available target construction start timing, 86% are targeted to begin construction yet this year or in 2027. These units represent just 18% of the total planning pipeline.
The report also noted that 17,609 units were deferred, representing projects temporarily on hold but which may re-enter the planning or development pipeline.