Irvine, California-based real estate investment trust (REIT) HCP (NYSE: HCP) expects to raise senior housing rents between 4% and 5% this year.
The major senior living owner anticipates these increases due to increased wage and labor pressure, HCP President Justin Hutchens indicated during a presentation Monday at Citi’s 2017 Global Property CEO Conference in Hollywood, Florida.
Perhaps surprisingly, HCP doesn’t anticipate residents will react too negatively to this year’s rate increases.
“Socially, residents have an understanding of the care delivery they’re receiving and who’s delivering it,” Hutchens said. “When it’s communicated effectively—that that increase is being used to pay for the employees—it’s usually a relatively easy conversation.”
HCP expects that rate increases will occur in both primary and secondary markets, Hutchens added.
“There tends to be much more wage pressure in the primary markets, but [it’s] coupled with the ability to also pass along rent increases as well,” he said. “[We] don’t anticipate any issues passing that along, whether it’s in the primary or secondary market.”
Though HCP doesn’t yet have an outlook for rate increases in 2018, Hutchens anticipates that the rate growth in 2018 will be “as high as this year, if not higher.”
Written by Mary Kate Nelson