The long-term care sector is grappling with a perplexing paradox.
Service needs are growing rapidly, with more customers lining up by the day. And from the looks of things, that queue is just getting started.
Yet new construction of nursing homes is virtually non-existent. As for senior living communities? It remains sluggish at best.
Which begs an obvious question: Why aren’t operators in this space racing — and I mean racing — to dramatically increase supply for what will almost certainly be a wave of unprecedented customer demand?
Three key obstacles appear to be in the way: rising construction costs, labor shortages and capital access. To be sure, each of these challenges is real.
Let’s address construction costs first. By any objective measure, they have soared in the past four years — up about 35% by some estimates. But does anyone expect that related costs for land, material and labor will be going down? Au contraire. Building now, before demand truly peaks, could prove to be a move that is both economical and savvy.
Then there’s the labor challenge. Or should I say crisis? Staffing new buildings in an already tight labor market can seem daunting, but modern facilities could offer a competitive edge. State-of-the-art environments with advanced technology and thoughtful design can be a magnet for both residents and staff. Moreover, a well-designed facility can enhance employee satisfaction and differentiate operators when hiring is tough.
While the mood at last month’s National Investment Center for Seniors Housing & Care Conference was decidedly upbeat, access to capital remains problematic for many operators. Still, the fundamentals of senior housing are strong, driven by an aging population and increasing demand for care. Investors recognize this long-term potential. Capital will follow those who position themselves as leaders in operational efficiency and care quality.
The business case for building now is clear: Those who wait risk falling behind. Operators who invest today will be best positioned to serve the growing number of older adults — and to thrive in tomorrow’s market.
Yes, there are challenges here, as there are in any field of endeavor. But the real question for many operators should not be whether they can afford to build now. It should be whether they can afford not to.
John O’Connor is editorial director for McKnight’s.
Opinions expressed in McKnight’s Long-Term Care News columns are not necessarily those of McKnight’s.
