Will technology really help provide care solutions for the seniors housing and care sector? According to the 2018 NIC Fall Conference lunch speaker, new technology will have a huge impact on care—and sooner than you may think. Global tech entrepreneur Vivek Wadhwa is well-known for his ability to predict and describe revolutionary technological advances long before they transform our lives. His book, The Driver in the Driverless Car: How Our Technology Choices Will Create the Future, details emerging innovations and makes a strong case for embracing them. We talked to him about his upcoming presentation and how seniors housing and care stakeholders may benefit from his insights. What we can expect is this—the next few years will bring profound changes to the seniors housing and care sector, as a host of breakthrough products and services simultaneously enter the market.

NIC: What’s your message for the seniors housing and care industry?

Wadhwa: Within five years, our smart phones will have the same computing power as our brains. Then they’ll continue getting smarter. Because of advances in computing, artificial intelligence (AI) and sensors, the robots we imagined from pop culture and Sci-Fi are now becoming a reality. The sensors in our rooms, working with AI and the devices we carry in our pockets, will deliver personalized healthcare. We’ll literally have AI talking to us, telling us how we should live healthier lives. The advances we might have imagined growing up are now becoming a reality. It’s not science fiction any more.

NIC: Do you have a key takeaway for this audience?

Wadhwa: The strongest use of this technology is for serving and caring for the elderly. To the extent that operators and investors learn about these technologies, they can provide better care to the elderly, and can enhance the services they offer, all while improving operational efficiencies. They can make lives better.

Also, the largest growth market in the next five to ten years will be caring for the elderly.

NIC: Will this technology address major issues, such as staffing shortages, wage growth, and adapting to the value-based payment system?

Wadhwa: With intelligent devices such as Alexa actively monitoring and assisting individuals, you need less human labor. For example, imagine within every property, a diagnostics device that can perform many of the same tests as a hospital. It then connects directly to a doctor on a smart phone, providing all the necessary information for prescribing medications and delivering instant advice. This type of technology, which is already available in other countries, will reduce costs, improve efficiencies, and take care of the human element, improving outcomes.

NIC: Will you have specific examples?

Wadhwa: I will walk my audience through a variety of technologies—from AI and robotics to sensors, digital medicine, even self-driving cars. I’m going to give a timeline for what this means to them and when they can expect to see these in the market. Forget Uber. The biggest opportunity for self-driving cars will be transportation for the elderly—they will be the biggest beneficiaries of that technology, because they need it the most.

NIC: What piqued your interest in this topic?

Wadhwa: We’re all getting older. I’ve had many debates about what we’re going to do about caring for the elderly—particularly when they’re the majority of the population. There won’t be enough young people to care for them, therefore you will need technology.

NIC: How will new technology address labor issues?

Wadhwa: We’ve seen nothing yet. In the next five to ten years, we’ll see things get harder. Current labor issues are a small taste of what’s coming. Investors need to double their investments and not back off. In the long term, this sector is where the money will be made.

NIC: What’s the most significant innovation coming?

Wadhwa: If there was just one, this would be a very simple talk. The advances in computing are driving a host of technological breakthroughs, at an exponential pace, all at the same time.

NIC: If you had to pick one new technology, to have the most impact on the seniors housing and care industry, which would you select?

Wadhwa: For the elderly, I’d pick AI/robotics. These will be basically the same technology—devices that can do the work of a human being. They’ll have a huge impact on this industry. This category will include cars, drones, and a host of other intelligent devices.

NIC: What should investors, developers, owners, and operators do to prepare for these changes?

Wadhwa: They have to learn about these emerging technologies. Look at the demographics and the market opportunity. They need to think about how they can provide better services and efficiencies with what’s coming.

Are there resources you would point these stakeholders to?

Wadhwa: Well, here’s where my book, The Driver in the Driverless Car: How Our Technology Choices Will Create the Future, comes in. For this sector, it’s a must-read. It walks them through all of these things and tells them what it means for their lives.

NIC: How will all this technology change the experience of a senior resident, say in an assisted living facility?

Wadhwa: Seniors will live healthier, more engaged lives. Virtual reality advances will take them into new experiences, and new parts of the world. Life-like experiences will enable seniors to virtually travel. This technology is currently flimsy—it’s just for techies right now, but in five years, it will be like accessing a new reality. Five years is not that far away. In so many ways, the lives of seniors will improve.

How do you think your message will resonate with this audience?

Wadhwa: By the time I’m done, their heads will be spinning. They’ll be blown away and should feel very excited—and a little bit scared.

Registration now open

Back by popular demand, the 2018 NIC Seniors Housing Boot Camp, The Art of Assessing a Deal, will be held Wednesday, October 17 from 10:00 am – 2:00 pm at the Hyatt Centric Chicago. Boot Camp is an interactive workshop for professionals looking to familiarize themselves with the unique aspects of investing in seniors housing real estate.

This year, Boot Camp has been expanded to allow thought-provoking discussions from experienced industry experts who will review essential tools they use for successful deal making. The expanded half-day workshop has been designed to provide participants the opportunity to join the conversation and take part in comprehensive discussions reviewing current market conditions and trends, critical analyses that assess opportunities, and other important operational considerations.

Using recent NIC Map® data, participants will be immersed in a discussion on current seniors housing market fundamentals and trends, transactions volumes and valuations. Building upon this groundwork, boot campers will then actively participate in a discussion of a seniors housing property acquisition opportunity using a real-life offering memorandum (OM) that focuses on the operation of a property.

Expert facilitators will share perspectives on important topics such as analyzing market supply and demand, determining the investment thesis and strategy, and learning how buyers can access capital to finance the acquisition. After the deep dive discussion on the elements of assessing an opportunity, the workshop will focus on how operational strategies such as labor, staffing, sales and marketing can affect the property’s occupancy, net operating income, and valuation. These discussions will focus on current challenges facing seniors housing operators and provide tips for success.

The session culminates in an opportunity for boot campers to apply the knowledge gained in the workshop to develop a bid and compete to purchase the property.

Boot camp participants will leave with a better understanding of what to look for, how to assess an opportunity and then decide if they should bid, sell or walk away from a hypothetical opportunity.

New to the workshop this year, industry icon Bob Kramer will share current industry insights.  His presentation will provide his thoughts on the future of seniors housing and care and offer insights on the opportunities as well as the challenges facing investors today.

Join us. The 2018 NIC Senior Housing Boot Camp will provide participants tools for deal assessment as well as a great opportunity to network with colleagues and experienced industry thought leaders.  We hope to see you and your colleagues there!

We invite you to learn more about the facilitators and  how to register. (Space is limited.)

The Labor Department reported that there were 157,000 jobs created in the U.S. economy in July, below the consensus expectation of 193,000.  However, revisions added 59,000 to the prior two months as June was revised to 248,000 from 213,000 and May was revised to 268,000 from 244,000.  Payrolls have averaged 215,000 per month so far this year, up from 182,000 last year.

The unemployment rate fell to 3.9% in July from 4.0% in June. The jobless rate remains well below the rate of what is generally believed to be the “natural rate of unemployment” of 4.5% and continues to suggest that there will be growing upward pressure on wage rates.  The jobless rate is calculated from a different survey than the survey used to calculate the number of new jobs (the household versus the establishment survey, respectively).  Among major worker groups, the unemployment rate for adult men was 3.4%, adult women 3.7% and teenagers 13.1%.

A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—fell to 7.5% in July from 7.8% in June and was down from 9.2% as recently as December 2016.  The July rate of 7.5% was at a 17-year low.

In July, employment in health care and social assistance rose by 34,000. Health care employment continued to trend up over the month and rose by 17,000 jobs in July and has increased by 286,000 over the year. Hospitals added 7,000 jobs over the month. Within social assistance, individual and family services added 16,000 jobs in July and 77,000 jobs over the year. Construction employment continued to trend up in July and increased by 19,000 in July and has increased by 308,000 over the year.

Average hourly earnings for all employees on private nonfarm payrolls rose in July by seven cents to $27.05. Over the past 12 months, average hourly earnings have increased by 71 cents, or 2.7%.  This is the same as in June and up from 2.5% on average in 2017. A more comprehensive measure of wage pressure is the Employment Cost Index (ECI), which has shown greater acceleration.  In the second quarter, private wages in the ECI were up 2.9% from year-earlier levels.  Last year, they averaged 2.6% and in 2016, they averaged 2.3%.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work held steady at 62.9%.  Nevertheless, this remains quite low by historic standards, although up from a cyclical low of 62.5% in October 2015.  The low rate at least partially reflecting the effects of an aging population.

The July jobs report and the report last week from the Commerce Department that GDP expanded at an annual rate of 4.1% in the second quarter will provide further support for increases in interest rates through 2018 by the Federal Reserve. As widely expected, the Fed increased the fed funds rate by 25 basis points at its June FOMC meeting, the second increase in 2018.  The Fed has raised rates by a quarter percentage point seven times since late 2015, and most recently to a range between 1.75% and 2.00%, after keeping them near zero for seven years.  The June projections by the Fed now show a total of four increases in the fed funds rate are anticipated in 2018 (two of which have already occurred), up from an earlier expectation of three.  This would bring the benchmark rate to a range of 2.25% to 2.5% by year end.  The Federal Reserve also upgraded its view of the economy by substituting the word “strong” for “solid” in the statement that policy makers released after its meeting.  Further increases in the fed funds rate are anticipated in 2019.  Their projection for the fed funds rate in 2020 is 3.4%.  Hence, it is likely that there will be another 25-basis point increase announced by the Fed at its September and December FOMC meetings.

Many of you are familiar with the Future Leaders Council (FLC), the prestigious volunteer board for emerging leaders in the seniors housing and care space. The FLC is one notable program designed to deliver on NIC’s mission of nurturing leaders. But did you know NIC is also a sponsor for the National Emerging Leadership Summit (NELS)? As a member of the steering committee and a NELS Alumna, I represent NIC at this annual three-day summit in Washington, D.C., where rising stars in the seniors housing and care industry learn about leadership, advocacy, and career opportunities. NELS appears almost as an “FLC Light,” attracting property-level executives in the early stages of their careers. Like the FLC program, NELS challenges its participants to complete group projects, but for a one-year instead of FLC’s three-year commitment.

After working with this year’s cohort of NELS attendees in July 2018, I am filled with optimism for our nation’s elders living in seniors housing, skilled nursing, or receiving hospice. This group of around 30 young professionals brought positivity, ambition, and spirit to the summit rarely seen at your typical conference. Attendees spent time on Capitol Hill where Kripa Sreepada, also a NELS alumna and current staffer for Rep. Joe Crowley (D-NY), and I gave a presentation on how legislation and regulation impact property operations. We discussed opportunities to participate in that process, including membership in trade associations and how to submit comments to regulators on new rules and regulations.

While Kripa and I shared with them with the ins-and-outs of legislative and regulatory processes, the star of the show was Sen. Tammy Baldwin (D-WI), who addressed the attendees directly in an intimate setting. Sen. Baldwin shared her own personal story of the challenges of finding quality seniors housing for her grandparents, explaining how that experience led her to become an advocate for seniors through her work in Congress. As she put it, we must do more to ensure seniors can live “independently and vibrantly.” Well rest assured, Sen. Baldwin, the NELS attendees will strive to achieve just that.

The attendees also enjoyed a panel of experts including Randy Lindner, President and CEO, National Association for Long Term Care Administrator Boards; Theresa Forster, Vice President for Hospice Policy and Programs, National Association for Home Care and Hospice; Paul Williams, Vice President of Government Relations, Argentum; Matthew Mauthe, CEO, Marquardt Village; and Dr. Douglas Olson, Professor, University of Wisconsin – Eau Claire.

An interesting twist this year was the decision to represent hospice both in the pool of attendees and on the panel. Like NIC’s Spring Conference thesis that expects the future of the continuum to break down the silos among segments of housing and care, NELS too viewed this additional perspective as necessary to fully represent the spectrum. As NELS Director Kevin Hansen put it, “As we continue to think about the continuum of health and aging services, and the expansion of the continuum, it becomes ever more important to think about leadership in and across various lines of service that older adults may need at some point in their lives.” He also reminded that hospice and palliative care are distinctive, and that hospice is a service accessed throughout the continuum including in assisted seniors housing. Matt Mauthe added that “the days are gone that you can remain in your silos.” Yes, the evolution of the housing and care industry is apparent even at NELS.

You might be thinking, “How can I participate in such an exemplary leadership opportunity?” NELS is held each summer in D.C., and applications will open in the spring 2019. Though most attendees are property-level executives, this year’s group included a vendor, an HR specialist, and other professionals who could benefit from and contribute to the engaging week. I encourage you to send your best and brightest (or yourself!) to this fulfilling experience in 2019.

For more about NELS, click here.

NIC MAP^® Data Service clients attended a webinar in mid-July on the key seniors housing data trends during the second quarter of 2018. Key takeaways included the following:

Takeaway #1: Seniors housing occupancy fell to 87.9%

• The all occupancy rate for seniors housing, which includes properties still in lease up was 87.9% in the second quarter, down 40 basis points from 88.3% in the first quarter of 2018, and down 80 basis points from the second quarter of 2017. This was the lowest occupancy rate in seven years or since 2Q 2011. Meanwhile, assisted living occupancy fell to a record low rate of 85.2% in the second quarter.
• The quarterly decline in the occupancy rate stemmed from a significant increase in inventory in the second quarter—6,492 units. This was the largest unit increase in inventory since NIC began reporting the data in 2006. This in turn can be traced to gains in assisted living inventory which also registered the largest increase in unit inventory in the time series. Independent living inventory also increased, but it did not set a record.

Takeaway #2: Annual inventory growth outpaced annual absorption for both assisted living and independent living

• Assisted living inventory growth has been ramping up for a longer period than independent living in the Primary Markets. In mid-2012, the occupancy rate of independent living was the same as for assisted living at 88.8%. Since that time, there has been a clear divergence in occupancy performance reflecting the differences in supply growth and demand for the two property types.
• As of the second quarter, annual inventory growth for assisted living was 4.8%, up from 4.7% in the first quarter, but below the record high 5.2% pace seen in the middle of 2017. Annual absorption accelerated to 3.5% from 3.2% and was the strongest since the second quarter of 2016.
• For majority independent living properties, annual inventory growth was 2.1%, above the growth in absorption of 1.7%. In contrast, annual absorption outpaced annual inventory growth from the first quarter of 2011 through the second quarter of 2016.

Key Takeaway #3: Six Markets Account for Nearly Half the Inventory growth in Past Year

• The most absolute unit growth in seniors housing in the past year occurred in Chicago, followed by Minneapolis, Atlanta, Houston, Detroit, and Washington D.C. These six markets each had more than 1,000 units of new inventory brought on line in the past year, with Chicago leading the pack with nearly 1,900 units. These six markets accounted for 46% of all new inventory in the Primary Markets in the past year.
• In terms of percentage growth in inventory, the largest gains took place in Houston, Atlanta, Detroit, Orlando and Minneapolis. The strongest net absorption also occurred in many of these markets as seen by the markets. This includes Atlanta, Houston, Minneapolis and Denver.

Key Takeaway #4: Same-store rent growth decelerated

• Same-store year-over-year asking rent growth for assisted living was 2.8% for the second quarter, down 20 basis points from the first quarter. For independent living, rent growth accelerated to 2.6% from 1.9% in the first quarter.
• There is wide variation in rent growth, however. Among the Primary markets, the top ranked metropolitan areas for year-over-year rent growth in overall seniors housing were Portland Oregon, San Francisco, Seattle and Los Angeles. Poorest rent growth was in Dallas, Kansas City, San Antonio, Detroit and Atlanta. Many of these same markets have some of the lowest occupancy rates in the nation as shown in earlier slides (Dallas, San Antonio, Atlanta, Houston and Chicago).

Key Takeaway #5: Closed Seniors Housing & Care Dollar Volume: $2.3bn for 1Q18

• Preliminary estimates of seniors housing and care transactions volume totaled $1.7 billion in the second quarter. That includes $1.2 billion for seniors housing and $500 million in nursing care transactions. The total volume was down 40% from the previous quarter’s $2.8 billion and down 25% from the second quarter of 2017 when volume came in at $2.2billion.
• Current figures show a 42% drop in single-property deals from 110 closed in the first quarter to 64 closed in the second quarter. Portfolio deals also decreased 42% from 19 closing in the first quarter of 2018 to only 11 in the second quarter.