Contact Us
News

More Uncertainty Ahead For Phoenix Healthcare, Senior Housing (But There Will Still Be Deals)

For senior housing and healthcare in Phoenix—and in most markets—these are strange days indeed, according to the speakers at our Phoenix Healthcare Development & Senior Living Expansion. Post-election, there's a lot of uncertainty. Yet the demand for these kinds of properties is certainty going to grow

Placeholder

Here are Sun Health EVP Joe La Rue, Assisted Living Locators CEO Angela Olea and Telis Senior Living president Mark Huey, who spoke about senior housing.

Beyond the immediate uncertainties caused by the election, our senior housing panelists said the market sector is facing other challenges in the short- to midterm, especially for developers. Land and construction costs have increased considerably in recent years in Phoenix, making it more difficult to develop even in places where the demand would support it.

Also, some of the speakers reported debt financing is more difficult to obtain now. Lenders are pulling back, especially local ones, though a number of out-of-state lenders are still pursuing deals in Phoenix. Large and midsized banks also are still interested, but they don't want to overexpose themselves. To get financing, developers have to have a great project, prove beyond any doubt that there's market demand, and have a solid, experienced operator.

Placeholder

Above is The Weitz Co general manager Chris Harrison, who moderated the senior housing panel, and Hunt Mortgage Group director Jim Neil

On the operational side of senior housing, residents (and their adult children) are demanding more, and the industry's providing it. Especially important is a home-like environment. So are amenities. Senior campuses now offer multiple dining venues and wellness spaces, for instance. Residents are looking for an experience in their food service, such as fine dining, bistros, pizza kitchens and chef-oriented events. Wellness space is providing the kind of equipment that used to be found only in higher-end apartments, not in a senior housing environment. 

Changing technology is a wild card for the senior housing industry. Some new tech, such as motion monitors that alert caregivers when something's amiss, or electronic devices that make residents feel more connected, will improve assisted living operations. On the other hand, what will changes in transportation mean? Will senior housing need more parking for autonomous vehicles in the future? Or will new technologies allow people to stay in their homes longer, reducing the need for senior housing? So far there are no clear answers.

Placeholder

Here are Irgens VP, development Jason Anzalone and Green Card Fund principal Kyle Walker, who spoke about the healthcare property sector.

Our healthcare property speakers said Phoenix historically has been a fragmented market, but that's changing with consolidation. The process started in earnest a few years ago, and it's going to continue even more in the uncertain healthcare climate, because uncertainty drives consolidation. That includes hospital systems, but also physician groups and other providers, since joining together gives them a better competitive advantage

Even so, healthcare development faces some challenges similar to senior housing, such as high land and construction costs. Also, it's a little harder than it used to be to find tenants who want to commit for long-term leases, and rents for healthcare aren't growing robustly. Still, there's existing stock that can be redeveloped, often below replacement cost, and the demand for outpatient clinics is expected to grow.

Placeholder

Here's KEPHART principal Bryce Hall, who moderated, and Bayless Healthcare Group COO Denise Murray-Leitz.

Integrated care is an increasingly important concept in healthcare, but what is it? Simply put, it's the systematic coordination of general and behavioral healthcare. The devil's in the details—integrating primary care and mental health services to care for people with multiple healthcare needs—because if a healthcare system focuses on just one aspect of the patient's needs (say, physical health), his or her other needs will likely be unmet, and outcomes will suffer.

Integrated care will mean more comprehensive facilities will need to be developed to support this model of healthcare, since a lot of the medical office space that exists now simply can't do so. Multiple uses need to be close to each other, and older buildings are more fragmented and not conducive to the integrated model. That means there will be a lot of opportunity to redevelop existing space to better provide integrated care.