Four industry professionals recently sat down with the St. Louis Business Journal to discuss recent trends in the senior living industry. Hear what Todd Goodrich, Vice President of Business Development, had to say at the Table of Experts:
Senior living is a popular topic right now. Let’s start with what trends are changing this industry. Todd, what do you see in the industry regarding the construction and development of senior living?
Todd Goodrich: We still see a lot of activity in this market with continued development and redevelopment of properties. What gets a lot of press recently has been the construction of stand-alone assisted living and memory care buildings all over the country. We see a lot of activity in that market. We’re also seeing a significant amount of our revenue come from our nonprofit providers. They have a more aging, established community that they need to reinvent in one way or another. It could be right-sizing their health care skilled nursing components or adding assisted living to their campus offerings. Even renovating or expanding their independent living, and updating and adding to the amenities that they provide on campus. We see a lot of activity looking at campuses’ existing facilities and repositioning those to be more competitive in their space.
Todd, how have increased construction costs affected the development of senior living?
Todd Goodrich: Adversely. As Carmen and Kiel can attest, our nonprofit clients already operate on very slim margins. Just by the nature of their business and missions and the way of providing care. You couple that with rising health care costs, increasing staffing challenges, and a clientele who’s almost solely on a fixed income. Also, facilities that may be past their prime or soon past their useful life. Add on rising construction costs and it just makes a challenge even more challenging. There are creative ways to help reduce those construction costs. It’s imperative for any provider who’s looking to start a new venture like this to assemble the team. Obtaining an architect, builder, and a financial consultant early on in the process helps avoid rework and budget issues as it gets further into the process.
Also, make sure you’re spending the money where you’re going to get the most impact. Being able to take a vision and break it down financially will help reposition the client in the market and is certainly a good strategy. We continually look to partner with architects like Brian and our owners to invent creative ways to pre-manufacture products off-site to reduce construction costs and reduce waste. We do engage the key partners and subcontractors early so they can also anticipate the workforce needs. There’s a lot of different strategies to help with that challenge for providers.
Do you have a solution?
The leadership of the providers needs to enter into a development project with an open mind. They may have to stretch themselves and use creative thinking to solve the problem. Often the idea of tearing down an asset is challenging for people, especially the board of directors, to get their head around if they have something worth value. What if the skilled nursing institutional model isn’t functional from an operational perspective, a marketing perspective, or an amenities perspective? Sometimes you’ve got to think outside the box and completely reinvent the campus and not just try to provide updates to an existing building continually.
Anyone have anything else to add?
Todd Goodrich: Wisely constructed buildings are significant to the newer generations. Making sure that there’s not a lot of waste, making sure the environmental concerns are being talked about and addressed. Almost every project someone is asking what is sustainable or what green initiatives we are incorporating into the construction and design of the property. It is something that gets attention, and it’s genuine. Being financially sensible, they want to be sure that their dollars are being spent wisely for the environment, as well as for the financial well-being of the community.
What services are available for seniors who need some care assistance but want to stay in their homes instead of moving into a senior living community?
Todd Goodrich: I’ll echo something that someone else said, with the social aspects and the residents being the deciding factor. My mother decided to move to a community where her friends were. That was the end of the discussion, she researched to make me happy, but in the end, she had already made up her mind where she wanted to be. She’s 75, so she’s relatively young. Some of the financial questions and implications that come with decisions at 75, it can be daunting to try and line up the comparisons and genuinely understand the choices that she and others are making. In the end, it ended up being where her friends were anyway. I thought that was interesting.
So, what does the future look like for senior living? Todd, how do you see the industry changing in the next few years?
Todd Goodrich: From the health care standpoint, it’s challenging to guess where we will be in 10 years with changes in Medicare and Medicaid and rising health care costs. That model, it is going to change substantially. What we see today is preparation for the future. We’ve seen this at Bethesda and as well as at Friendship Village. It’s trying to design as much future flexibility into the health care components of the projects as possible. We are developing them for assisted living or skilled nursing or skilled nursing light or whatever the future may bring. And to try to make our communities as flexible as possible. A lot of what we’re dealing with today are buildings that were built with an institutional model in mind 50 years ago. To reposition today and in the future, it is more costly and more challenging.
From an independent living standpoint, if you look at our clientele that moves into communities and takes advantage of the services, it’s the very top tier financially. Seniors that can afford to move into the place that has all the amenities. At the very lower-tier of the income range, there are still some subsidies that exist to help them live their senior years. In between is a vast number, 85% of the population, that don’t fit into either one of those. That’s where I think the future is going. How do you start solving for the mid-market, as we call it? And to do that, we have a whole new discussion around services and creative financing and physical plant. I think that model is very, very intriguing and it’s going to be a game-changer over the next decade.
Baby boomers that are now starting to enter this market space, the percentage of the mid-market versus the high market becomes much, much more significant. So, when developing that solution, I think it’ll make a massive difference in the lives of millions of seniors.
What is technology’s impact on senior community design? I mean, I know that I have to help my parents understand their iPhones, so I can’t wait to hear this answer.
Todd Goodrich: People are quick to assume that seniors don’t want technology, or that technology scares them. I think it’s quite the opposite. What we frequently hear is, “quit designing these buildings for old people. I’m going to live here.” However, it is refreshing that they are open to new tools. Today we have technology such as virtual reality and immersive reality, where they can view the apartment virtually with a set of VR goggles. You would think they’d be apprehensive about it. It’s different. Is it going to have the effects? What we’re finding is it they love that technology as much as anyone does. So don’t be too quick to judge.
View the full article in the St. Louis Business Journal.