Oversupply Fears Cause ‘Lazy’ Senior Living Companies to Miss Opportunities

Senior housing companies can be quick to paint entire states with a broad brush—especially when the conversation turns to oversupply.

But that’s a mistake, according to some experts.

“I think it’s shortsighted,” Senior Living Investment Brokerage (SLIB) Managing Director Matthew Alley told Senior Housing News. Alley has heard his fair share of oversupply talk in his work with the Glen Ellyn, Illinois-based senior housing brokerage firm, as he predominantly focuses on deals in the Texas market.

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Board members at senior living companies tend to read oversupply headlines and arrive at incorrect conclusions, Alley said. “In those cases, you’ve got to convince an entire board to develop or to buy in a certain state where the headlines all stay that it’s being overbuilt as a whole,” he explained.

When the board consists of five to ten people, that’s a tough feat—and companies end up missing out on great, untapped opportunities.

“I think it’s somewhat lazy,” Alley said.

“These larger companies often fail to take the time to really drill down and notice that, in some parts of Texas, there’s a huge need,” Alley said. “You can’t even really lump the whole Dallas/Fort Worth market together, you really have to talk about the northeast part of Dallas.”

Senior housing oversupply is a concern in every acquisition market, but in reality, it is specific to local markets, according to SLIB Managing Director Ryan Saul.

“Some of the higher-income urban areas are at risk for overbuilding, but that’s not necessarily the case for secondary and tertiary markets,” Saul explained. Those markets are more likely to see expansion rather than new facilities, he said.

In other regions, new construction is being watched with a critical eye. In certain markets in North Carolina and Tennessee, senior housing providers are watching from the sidelines as their competitors build, according to SLIB Senior Vice President Patrick Burke. Their plan? Let the dust settle, and pick up the property when it’s non-performing.

“They’d rather be the second person in,” Burke said.

Senior housing overbuilding is not yet a national trend, the SLIB team concluded.

“To this point, I have not had a new building that was built well, that had a good operating team, that did not lease up quickly,” SLIB Managing Director Brad Clousing said. And as a whole, the industry is doing well.

“The activity’s still there, the competition’s still there, the valuation’s still there, it’s just the universe is a little bit smaller,” Saul said.

Written by Mary Kate Nelson

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