According to a recent report from Integra Realty Resources (IRR), a successful real estate consulting firm, construction will be slow in the world of senior housing throughout the remainder of 2016. In the report, the firm indicates that skilled nursing facility (SNF) development will be “minimal” and that the facilities that are newly erected will likely focus on short-term, post-acute rehabilitation services. This should come as no surprise to those within the industry, as we are seeing more and more facilities close their doors and eventually reopen under new ownership. It is no secret that many existing SNFs have struggled over the last decade. Whether due to the recession or some other factor, we have seen numerous facilities file bankruptcy. So, what does this mean for senior housing – more specifically those interesting in investing in an SNF?
Depending on where you stand, the lack of SNF construction is viewed as a positive. As we continue to see troubled, older facilities close their doors, we expect to see a trend of interested investors swooping in and capitalizing on the situation. Under new ownership, many SNFs are able to get back on their feet and provide residents with high quality services. While we may not be seeing very much new construction in senior housing, the following is taking place:
- More than 7,000 SNFs were under construction throughout the United States as of the third quarter of 2015
- During the same quarter of 2014, only 3,600 were under construction
These numbers show that more and more facilities are being bought and renovated, instead of brand new nursing homes being constructed. In many instances, the older facilities are simply in need of an overhaul and specific interior renovations.
When looking at the impact this will have on the senior housing market, it is important to take all factors into consideration. We are not in need of new SNFs, we simply need to focus on how to make existing facilities better and more efficient. Again according to a survey conducted by IRR earlier this year, people in general are optimistic about the nursing home market. In fact, 39% of those surveyed believe the senior housing market has yet to reach its high point. This is yet another great sign for those thinking about getting into the industry and investing in a troubled nursing home or assisted living facility. 2016 will continue to be a year of transition and change for the senior housing industry, and that’s not a bad thing.
If investing in senior housing is something that is of interest to you, we encourage you to contact us. Shep Roylance and the entire JCH Senior Housing Group team have years of experience facilitating senior housing transactions and we would be happy to discuss your options with you today.