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Will Senior Housing Rise in 2023?

Multi-Housing News | January 11, 2023 by Anca Gagiuc

In the fourth installment of our outlook series, senior housing experts discuss last year’s highlights and reveal their expectations for the year ahead.

Statistically, senior housing is on the verge of a substantial upsurge. The youngest members of the Baby Boomer generation are now nearing their 60s, while the oldest ones are in their mid-70s. The inescapable demographic fact—aging—means that many members of this generation will soon need senior housing facilities as, typically, residents move into senior housing facilities after they turn 80.

To put things into perspective, health-care infrastructure REIT Welltower expects the population of 80-year-olds to grow from 13.2 million in 2020 to more than 23 million in 2034. To add insult to injury, a dire shortage of dedicated housing is threatening the industry as, according to CBRE, the top 100 markets in the U.S. offer just 2 million beds of institutional investment quality.

In 2022, the senior housing industry didn’t have it easy, still struggling to recover occupancy lost during the pandemic and to deliver new supply in a market that was already occupancy constrained, according to Bryan Schachter, CIO at Watermark Retirement Communities. In addition, challenges in the labor market affected the senior housing industry too, as have rising inflation and interest rates, as well as ballooning construction costs that caused project delays. Schachter anticipates these issues to persist throughout 2023, and defines the overall long-term outlook for the industry as “strong, but choppy in the near term as a result of these various challenges.”


Years 2020 and 2021 were especially hard for the senior housing industry and 2022 showed, at first, promising signs of improvement. But the broader pullback in financing had significant impact on liquidity in senior housing assets. In fact, due to the higher business operation risks associated with this asset class, the lender pool of banks and debt funds has been relatively small when compared to other, more traditional asset classes, Dekel Capital Principal & Owner Shlomi Ronen told Multi-Housing News.

“As we saw, banks exited the commercial real estate lending market in the first quarter of 2022, hence the pool of lenders shrunk considerably, and the cost of borrowing increased in lockstep,” Ronen said.

Russell Phillips, managing director of real estate capital markets for Regions Bank, noted that rising interest rates deteriorated senior housing financing by pushing up the cost of debt for borrowers and lowering the loan-to-value and loan-to-cost. Of additional concern are cap rates, which typically lag interest rate rises. This has led to a disconnect between buyers and sellers, with buyers unable to pay the cap rate sellers are currently asking for.

“Eventually, the cap rates will adjust, but it will take some time,” Phillips expects.

Another fact describing the financing landscape in the senior housing market is that many lenders closed new loans during the first six-to-nine months of 2022, and there appeared to be a limited amount of debt available to borrowers during the fourth quarter of 2022 as lenders primarily focused on closing existing pipelines for the end of the year and on estimating available capital for 2023, Phillips detailed.

In addition, the senior housing sector also faced difficulties attracting talent and keeping facilities staffed, as Phillips pointed out. Moreover, “stagnant senior housing rents haven’t grown as much as we have seen in multifamily housing,” he added.


The pandemic was especially scary for senior housing, with renters being frailer and in need of greater protection. Hence, in comparison to pre-pandemic senior housing facilities, new developments are now designed with more attention to providing protection against another health crisis, along with a heightened awareness of what is needed for potential quarantine and isolation conditions, detailed Natalie Ruiz, associate principal at CallisonRTKL. This means that staff, visitors and service personnel use a controlled lobby with areas carved out for check-in kiosks where temperature checks are performed.

Like multifamily and SFRs, newer senior housing facilities have designated delivery areas and package lockers with direct access from public circulation, which help reduce resident exposure to outside delivery persons, more so since we’re now in the era when everyone relies on deliveries directly from retailers.

A winning planning design strategy that emerged following the COVID-19 pandemic is incorporating multiple “wings” into senior living communities, Ruiz said. These wings replace the former large common spaces used to serve an entire community—specifically the dining room, living room and outdoor courtyards—with smaller ones grouped into pods and serving a smaller occupant load where socialization is encouraged and more easily managed.

In addition, units built post-pandemic are typically larger, according to Tom Pflueger, senior associate & studio director at MBH Architects, so that families can come to visit within the comfort of their unit while allowing for social distancing when needed. UV-enhanced fans and hands-free sanitary fixtures are also more common, and Wi-Fi, electric hook-ups and technology connections are prioritized to enhance residents’ connectivity with their loved ones.

More attention is also being paid to offering an active lifestyle to residents by means of community gardens, exercise studios and multi-purpose classrooms. MBH Architects’ designs feature larger common areas and flexible outdoor areas, with social interaction as the key intent.

“If done correctly, the design of the space naturally creates the separation of groups and defines safe zones for each group,” Pflueger pointed out. “With this strategy, everyone is still part of a large public area, but the spaces you have designed provide for the confidence of safety and distance.”

While social distancing measures helped protect the body, they hurt the mind, and senior housing operators and developers are now more aware of the critical impact that socialization has on their residents’ daily lives—from seeing family members to having positive interactions with staff, to establishing a community with other residents in the common spaces, emphasized Blima Ehrentreu, CEO & founder of The Designers Group. Not only are the common spaces designed for different group activities, but they are also addressing this need to socialize by integrating elements of hospitality projects into senior living spaces.

Designing spaces for the senior housing market comes with unique challenges, ranging from operations to local, suburban and urban design, and high and low acuity, according to Ruiz. Adding the number of different resources and treatments available, assisted living projects are inherently more complex than independent living projects, because “the overriding goal is to achieve a sense of home in these facilities,” said Pflueger.

A big challenge now is the affordability aspect, as developers are less likely to invest in affordable senior living communities, said Shannon O’Kelley, senior project manager at Pininfarina.

“The need for senior living at all levels isn’t going anywhere and will continue to rise, so it’s crucial to be able to provide housing that’s accessible to all seniors,” she added.

How do you make spaces inclusive and all-encompassing? By supplementing an enhanced level of care in nursing centers and senior living communities with a functional environment. An example is The Designers Group’s King David Center in Brooklyn, N.Y., a senior housing community that features a HydroWork 1200 aqua therapy pool with hydraulic floors and smart technology which, they say, satisfies the varied demands of both traditional physical rehabilitation and mental wellness.


The brewing recession will definitely impact the senior housing market, but not as much as it will affect some of the other real estate classes, “or even as much as the pandemic did,” according to Phillips. The main reason is that demand is expected to increase progressively over the following years as many Baby Boomers will be reaching the peak age to enter senior and assisted living facilities.

Meanwhile, development of new senior housing will dwindle, Ronen believes. Yet, with the demand side of senior housing—especially assisted living and memory care—more needs-based, it makes senior housing similar to other health-care properties for which demand from residents should be resilient to an economic crisis.

“Overall, the industry should fair well. However, we are still seeing the lingering effects of the pandemic and expense inflation,” Ronen said.

Even though the market should prove resilient to economic downturns, Schachter warns that the combination of all the factors hitting us right now will make the next 18 to 24 months extremely challenging. He anticipates more mergers of senior housing operators and a number of distressed transactions which will, overall, lead to a consolidation in the space. Ronen also expects that in 2023 we will witness a significant amount of distress as undercapitalized owners will be unable or unwilling to fund the additional equity needed to sustain their properties.

The financial aspect of projects remains a big challenge as it’s a cumbersome task for any multifamily housing developer to balance the cost of construction with the desired program, according to Pflueger. Moreover, there are different sources of financing available for certain types of projects and Pflueger believes that senior and affordable development will remain robust even when market-rate projects may be slowed down during this cycle.

“An important challenge to address is that most seniors will not be able to afford housing, especially the current resort model which is affordable to only 5 to 10 percent of the demographic market,” Ruiz mentioned. “Therefore, it challenges us to find solutions for the missing middle in senior living.”


In 2023, amenity-driven senior communities that resemble resort living will likely continue to trend. From mixed housing options to indoor-outdoor connections, spaces for socialization, media rooms, fitness areas, and the latest rage—pickleball courts—amenity-rich spaces within senior housing developments will continue to be prioritized, Ruiz expects.

Watermark Retirement Communities’ business strategy for 2023 is focused on completing, opening and leasing up the developments they began in 2020 and 2021. “These projects are largely focused on the high-end segment of the industry and are better equipped to withstand the impact of certain challenges we are facing, including the housing market impacting home sales and labor rates,” Schachter said.

Senior living will continue to evolve and the goal will remain to provide inspiring and safe environments that encourage healthy lifestyles, connection and self-confidence. “It’s laying the groundwork for seniors to be engaged, productive and independent in their homes, with access to support services that aid in achieving and maintaining a high quality of life,” Ruiz noted.

And as senior living evolves, Ehrentreu expects to see design elements that optimize a facility’s capabilities, curating a high-end interior environment that accurately showcases the center’s quality of care.

Pflueger also sees an enhanced connection between the environment and the community itself, as it provides an opportunity for senior residents to be active and engaged. This could mean more gardening activities, more sitting in the sunshine and going for walks, but also residents being able to step out for groceries or coffee.

In addition, multi-generational households with in-law units, or accessory dwelling units, may become more of the norm over the next few years, as some seniors move back in with their children.

“Units are already bigger so residents can work remotely, and we need to think about how the space can be flexible and equipped for the range of residents’ needs, from extra bedrooms to home offices,” Pflueger said.

Steady improvement on the occupancy side is also anticipated in 2023, according to Schachter, but with pressure on rates. Meanwhile, markets in which there is better elasticity of demand/pricing will be better able to absorb the impact of challenges and still produce strong NOI/margins.

Net cash flow may likely not increase much, according to Phillips, because revenue growth—unless considerable—could be largely offset by rising insurance rates and payroll costs, which are a large portion of a facility’s overall expenses. “Senior facilities that have not yet begun to turn around following the challenges of COVID-19 may not ever fully recover, unfortunately,” he said.


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