NIC has a virtual treasure trove of data related to the seniors housing and care sector that can provide insights into operations for both operators and investors. In the coming months, as we begin a new year and decade, NIC’s Analytics and Research Teams will provide such insights. This is a condensed version of NIC’s first Actionable Insight article, published in the February NIC Insider newsletter, and serves as a preview of more to come. As always, we appreciate feedback and commentary on this article as well as our monthly NIC Insider articles and our two frequently updated blogs—NIC Notes Blog and Senior Care Collaboration Blog.
ACTIONABLE INSIGHT: For this article, NIC’s analysis shows that on a rolling four quarter basis, the average time to construct a new seniors housing property—either assisted living or independent living—takes nearly two quarters longer today than it did in 2014. This suggests that when underwriting a new seniors housing property development, a longer time frame should be considered between the time when a project breaks ground and the time when it is opened for occupancy.
EXECUTIVE SUMMARY: Construction, delivery pipelines, and development are hot topics in the seniors housing sector. Anecdotes abound regarding the time to opening from the time ground is broken on a new property. This commentary uses NIC MAP® data to investigate the anecdotal comments that new property development projects are taking longer today than they did in 2014. The reasons could include but are not limited to changing unit mix and complexity of projects, rising construction costs, changing regulatory environments, and limited availability of trained subcontractors—especially for those who specialize in subtrades that require more skill.
KEY FINDINGS: Key findings from NIC’s analysis include:
EXPLANATION OF FINDINGS: Potential factors affecting these observations include but are not limited to:
Other external factors contributing to a longer length of time to opening may include:
LIMITATIONS AND CAVEATS. It is important to note that construction data is revised. NIC occasionally finds out that a project has broken ground after it has done so or that a property indicated groundbreaking prematurely. Occasionally, a property will open sooner than estimated or indicate a shift in the open date. This means that over time there may be shifts to what cohort a property falls into or occasionally potential shifts to length of time under construction before being open for business.
Future analyses could investigate questions around unit mix, frequency of phased openings, and other questions around inventory trends like the relationship between project size and time to opening. Future analyses could also investigate whether the trend observed in the current data continues over time.
CONCLUSION: The rolling four quarter average length of time from a new seniors housing property breaking ground to having open units has increased since 2014 for both majority IL and majority AL in the 99 Primary and Secondary Markets. As of 4Q19, majority IL properties have a rolling four quarter average of 7.8 quarters from ground break to opening. Respectively, majority AL properties have a rolling four quarter average of 6.7 quarters from ground break to opening. These numbers reflect the aggregate trend for the 99 Primary and Secondary Markets, and there is likely variability at the metropolitan market level. Some markets may not be not seeing an elongation of the construction cycle, while other markets are possibly experiencing longer delays (potentially markets with a larger number of projects underway). When putting together plans for development, it makes sense to consider today’s environment of a more elongated construction cycle.