b'ADVERTORIALSeniors Housing& Long-Term Care2024 OutlookSeniors housing is a vital and growing sector in the Canadian economy with a great deal of potential given the growing population of retiring and aging baby boomers.Over the next two decades, the population ofend of 2024. 2Construction prices alsoOperators will remain focused on Canadians aged 75 and older is expected to growstarted to stabilize. We expect the Bankincreasing occupancy levels and fastest at over 110%, compared to 20% for theof Canada to keep interest rates nearrevenues while managing costsbroader population. With the life expectancycurrent levels until the second Recently announced changes to fast-of people aged 65 and over increasing 1 , so toohalf of 2024. 3With interest ratestrack the accreditation of internationally are the demands for services to care for them.stabilizing, there is improvement seeneducated nurses 4 should help manage With waitlists growing and government-fundedin stock prices and more conversationscurrent labour supply shortagesconstruction and investment increasing, theon the development and merger and opportunities in the sector are significant. acquisition front. Our view is that it will take 12 to 18 Following are a few key trends and months for the sector to normalise with developments were tracking. Among other trends, larger players arecontinued support from lenders and the choosing to divest smaller properties ingovernment, helped further by easing in 2023 was a tough year for the sector as it wassecondary markets. At the same time,both inflation & interest rate pressures.impacted by rising costs in terms of rising ratestheyre building for scale in larger urban and wages due to inflation and labour shortages.centres. Operators are also leaving The rising interest rate environment also impactedexisting business lines to focus on eitherLets connectvaluations as cap rates have risen. Increases in risklong-term care or retirement. Whilebmo.com/businesspropertiespremiums impacted equity markets negatively,these moves led to significant merger including stocks of public senior housing operators.and acquisition activity over the last fiveRoy DiasWe also saw development costs rising in the firstyears, deals have been challenged givenSenior Vice President & half of 2023, resulting in many developments beingthe rising rate environment. BuyersHead, Media & Business sidelined. Uncertainty in the residential real estatecontinue to resist paying a premiumProperties Financing, BMO market and declining sales volumes also slowedfor the promise of future income,Commercial Bank, Canadalease-ups in seniors housing. Meanwhile, somewhile sellers are taking a wait-and-seeroy.dias@bmo.comlong-term care projects were sold for alternate approach, focusing instead on improving uses as their licenses matured. To counter thisoperations and cash flow. However,Sanjay Aroratrend, provincial governments did their best towe believe consolidation will continueManaging Director & Regional incent development by increasing funding andgiven the capacity of larger firms toVice President, Central and subsidies to developers and operators. support the higher costs associated withEastern Canada, Business construction and operations. Property Finance, BMO Most of the above-mentioned negative trendsCommercial Bank, Canadastarted to show signs of improvement in theOther developments to watch include: sanjay.arora@bmo.comlatter part of 2023. A combination of low newIncreasing regulation and higher development and aging population and an increaseoperating costs should persist in Stephen Vermettein demand resulted in occupancy levels showingthe short-to-medium term Managing Director & Regional signs of improvement. Occupancy improved fromVice President Western Canada, low 80% in 2022 to mid-high 80%, on average, byConsumer demand for gatedBusiness Property Finance, BMO the end of 2023. We expect this trend to continuecommunities with on-site Commercial Bank, Canadawith occupancies expected to reach low 90% by theamenities should increase stephen.vermette@bmo.comBMO Commercial Bank is a trade1. https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98-200-X/2021004/98-200-x2021004-eng.cfm2. Seniors Housing Operating Performance Canada: Cushman & Wakefield (Sep23)name used in Canada by Bank of3. https://commercial.bmo.com/en/ca/resources/economic-insights/2024-canada-economic-outlook-yielding-to-reality/Montreal, a CDIC member. 4. https://www.cicnews.com/2023/01/provinces-working-to-make-it-easier-for-internationally-educated-nurses-to-work-incanada-0132442.html#gs.xywbtx'