By 2030, the 80 plus population will grow by about 37%. So that's taking an industry that, if you hold penetration rates basically constant, we would need to grow by about 37%. Construction starts over inventory right now, I think, are somewhere in the half a percent range. - Welcome to season seven of Bridge the Gap, a podcast dedicated to informing, educating, and influencing the future of housing and services for seniors. Powered by sponsors, AccuShild, Align, Nick Map Vision, ProCare HR, Sage, Hamilton CapTel, Service Master, the Bridge Group Construction and Solidity, and produced by Solidity Marketing. - Welcome to Bridge the Gap podcast, the senior living podcast with Josh and Lucas, a very excellent data-filled episode. You're gonna wanna lean into this. This may be one that you listen to a few times because we have Eric Morton of Nick Map Vision on the program today. Welcome to the show. - Thank you, Lucas. It's a pleasure and an honor to be here as always. Thank you for having me on. - Great to have you back. These are always very exciting conversations for me because we get to really nerd out on some data that is very important to the industry. And you guys are not just on the cutting edge, you're on the bleeding edge of all of this data. I would say the tip of the spear heads down in understanding and curating this content. And what a fun and awesome way to get this out on a podcast freely to everyone. And we really appreciate your time, energy and support on this. And so as we dive in, look, I think one of the big topics is a demand of demographics. So today we're gonna be going into the demographic surge. We're gonna be talking about absorption rates. We're gonna be talking about the increasing demand. Also the development pace. We're gonna go down a lot of trails. And I know that our listeners are gonna wanna be taking notes and leaning in. So Eric, start us off, talk about this surge that really I've been hearing for my entire career. I've been at this 15 years and I've been hearing about this surge of demographics. But it really seems as real as it's ever been, at least for me in the past 15 years. - Yeah, absolutely. Well, Lucas, thank you again for the opportunity to be here. It is always a pleasure. And I think you've pointed out correctly. We, Nick Matt Vision, just released a couple of weeks ago our senior housing market outlook, which is our first real kind of all of company effort to pull all of the data that we have together to offer really a comprehensive picture of where the market's at. That is something we've made freely available. So if you're interested, you can follow up. We can put a copy in the show notes or whatnot. But I think stepping back in the senior housing industry, demographics are destiny, right? We are a need-based product and we have a consumer base that is going to be as big or as small as just the number of human beings who have a need for our service. And so in the 1930s, obviously, there was a significant suppression of birth rates due to really primarily the depression. But then that kind of moved into World War II. And then as soon as really folks started coming back home from the war and even a little bit before that birth rate started surging and that gave rise to the baby boomers, which are the largest generation here to four in American history. And so if you add 80 to 1945, you get 2025, right? And so that has been kind of this El Dorado for the industry. As you pointed for the last 15 years, I've had the good fortune to be in there on the industry a little bit longer than that. And it's always been wait till the baby boomers, wait till the baby boomers. And so we just got through COVID, we just got through kind of the dislocation that has come from that. And so what we wanted to do is sit down and say, all right, let's take a look at kind of all of the fundamentals that are driving the industry. 'Cause what we're seeing inside of the absorption data is truly kind of incredible. Let's start to talk about that. So that's a little bit of a backstory. To get to your question on the kind of magnitude of the upcoming demographic surge, I mean, it is in terms of kind of the typically slow rate of demographic change. It is a explosive change. And so the silent generation, which is generation before, had about 47 million individuals at its peak. And the baby boomers will be 76 million and even a little bit bigger than that, especially when you account for life expectancy. And so what's especially impactful about that is kind of the pace at which it's coming. So if you look at, if you take 2023 and you say, what happens in the next, by 2030, the 80 plus population will grow by about 37%. So that's taking an industry that, if you hold penetration rates basically constant, we would need to grow by about 37%. Construction starts over inventory right now, I think, are somewhere in the half a percent range. So if you kind of look at the gap between what we're growing inventory and how rapidly that demand is coming, it is an absolute chasm between those two. And we're seeing it in the absorption numbers. So first quarter 2024 absorption was 40% above, first quarter 2023 absorption, 40%. And that 2023, first quarter absorption was already a historic record for Nickmap data. So we're seeing basically kind of quarter over quarter, year over year, we're basically seeing historic absorption. And you kind of pull back and look at that. You look at the data and we have some slides in there. It's a pretty simple story. Day plus population, that wave is starting to break. And so that is something that is only going to kind of accelerate from here on out. So it's going to truly be defining for our industry in the next 20 years. - Well, I like how you put that with actual facts and data because some people may say, well, it's a demand after COVID. This is kind of just a momentary seasonal effect coming out of COVID. I think clearly what you just outlined really kind of shows that that's not the case. - I wanted to tease that out. We made a kind of a dedicated effort to tease that out, set down, got some really smart people from around the industry to kind of weigh in on this. And so the way we sought to analyze that, 'cause obviously you had basically COVID shutdown, so you had demands plunge, and then you had reopening and you saw a demand surge. So the question is, are we still seeing the artifact of that? Now, I think if you sat down and kind of said, do you know anybody who's still sitting at home saying, well, I know COVID ended kind of almost four years ago, I don't know if it's safe to move into senior housing. I'm not sure anecdotally that we're really seeing that, but that's not good enough. We want to get to the data. So what we did is we sat down and we looked at penetration rates. So the question is, what percentage of the 80 plus population resides in senior housing? And so our thought was that if that penetration rate is still below where it was pre-COVID, then you could make an argument that we're still basically catching back up to kind of the demand that we lost. If not, then you would say it's probably the 80 plus population growth that's driving it. And so we sat down and we looked at that and what you see from the penetration rate graph. And there's a great slide. And I think it has an incredible story about our business, which I'm happy to get into, is that between 2010 and basically 2020, you know, January 1st, 2020, we saw penetration rate grow by about 1% from about 10 to 11 if memory serves. And so, you know, great, it's kind of a gradual increase. And so we overbuilt in the 2010s. You can, there's a graph in there that shows construction over inventory versus 80 plus growth or inventory growth over 80 plus growth and we outpaced it basically every single year. So you saw occupancy decline, but not as bad as you would have expected because the penetration rate ticked up. So we managed to attract a new more customers as a percentage of the overall population. Then COVID hits and you see the penetration rate plunge. We lost about six years worth of penetration in about two quarters. So I think it went from, you know, somewhere in the 11s down to like high 11s to low 11s. Then basically as soon as the COVID vaccine, you know, came into production and or it became into distribution and, you know, kind of locked down, stopped. We basically went on a six month run where we recovered all, we were covered about six months, six quarters, excuse me. We recovered about six years worth of penetration in about six quarters. And boom, we were right back to the same penetration rate we were at before COVID. And so to me, that says that basically, you know, that kind of, that demand recapture thesis finished out in late 2022. And so then you look at 2023 and you say, wow, the absorption in 2023 was about double the historical, the pre-COVID average, double, double absorption. So that's a 100% growth in demand in the year of 2023. And then 1Q 2024 is 40% above 1Q 2023 looking, you know, we have the data release for 20 for 2Q and you'll see a similar story come there. That comes out in a couple of days. So you could still make the argument. And again, I mean, the data tells a story, but it doesn't, it's not, I think, definitive. But I think the strong, the preponderance of the evidence certainly suggests that it is population growth that is driving this historic absorption at this point, not recovery from COVID. - There's another metric that was really striking to me that you mentioned and it was the kind of the contrast between the demand and development. And you mentioned, I think you use the phrase, "acasm" and which I thought, you know, wow, this is more than bridging a gap. This is a chasm that those numbers are so drastically different. So talk to us about this barrier to increasing the development pace to meet the demand and how are developers and senior housing going to overcome this obstacle? - Assuming we were still in the, you know, the best development times in the mid 10s, right? You know, 2016, 2017, you know, 75% non-recourse financing, all that kind of good stuff. Even if we were there today to meet the bogey by 2030, we would need to do about twice, two times, the amount of development we did in any one year in all of senior housing history. So that's, you start there, right? You start there, that's where you start. So that's already, even if we were sitting around and, you know, times were as good as they possibly could be, we would still need to, you know, put on our running shoes and start sprinting to keep up. But then you kind of look at, well, where are we today? And we need to roughly quadruple our current pace because, you know, obviously we're touching all-time construction over inventory lows. You know, when you see some of the numbers that'll come out this quarter are, you know, and those are always subject to revision, but they are, they're dragging bottom, you know, all-time low, near all-time low. Doesn't really make a big difference. And so obviously kind of what's happening is that the credit markets are incredibly tight. You know, there is an interest, everybody kind of sees an interest rate cutting cycle that's coming, but it still hasn't materialized yet. And so I think, you know, the banks as well as a lot of the industry participants are still kind of saying, well, you know, let's see a couple more cards before we start pushing big chip stacks into the middle. And so, you know, I think that is still obviously kind of suppressing new development activity. And so what's gonna happen in 20, 27, the 80 plus population is gonna grow by seven and a half percent. So, you know, I think our all-time, you know, kind of construction over, or development inventory growth numbers probably somewhere in the three to four range, maybe even less. And so, you know, there's just, there is going to be so much new demand coming into the market that, you know, we will just will be chasing that, you know, at least probably through the end of the decade, because obviously, as you know, you know, even if everybody said, all right, I'm ready to push my chips in the middle today, you know, what, 18 months, two years to get the site entitled, you know, another 18 or two to get it built. I mean, you're talking, you know, four years probably, in that's in probably, you know, the Sun Belt, not, certainly not any of the, you know, more administratively burdensome jurisdictions. You know, you're looking at four years, that's 20, that's mid-28 before you're delivering product, even if you decided to really go today. And if you're in California or New York or somewhere, all I mean, you know, could be in the 2030 handle, right? So, you know, I think as an industry, we are going to be chasing that demand, you know, which I think creates the incredible investing opportunities, both on new development, but then obviously, if you're, you know, kind of back into that and say, well, what does that mean for assets I own or assets I buy? You know, if you're picking the right markets, obviously this is national data. So, you know, you still got to pick your spots and there are areas with declining populations. I mean, every senior housing property is kind of its own business. There is opportunity, there's incredible investment environment that's setting up right now. - And I'm seeing it too. I'm in and out of communities really almost every week. And these are typically legacy age communities, somewhere between 20 and 30 years old. And I've been visiting those aged communities really for my entire career and hoping and wishing like many others that they would get updated. And I'm seeing a real increase in focus on value add acquisitions or just taking these legacy communities and bringing them up to date, reimagining some of these antiquated spaces that are not really being utilized or maybe weren't, the floor plan doesn't fit to today's needs and also an increased focus on upgrading the units, which in my opinion has been a drastic lag really in my entire career as has been kind of limping through upgrading units. And they may even be focusing on the common spaces and you walk these beautifully renovated common spaces, you walk into the units and it's like, this unit does not match the rest of the building. And it's kind of been like, well, we'll get to it. So for me, actually, that's one of the pieces that I'm excited about is that these legacy communities, these older buildings, which is a big portion of the inventory in the United States. - 50 or 60% of the inventory, I believe, is over 25 years old. 45% is over 25 and like 60% is over 17 or 18 years. - Okay, wow, I mean, what an amazing opportunity to take these communities. A lot of them have great reputations, they have great care, great staff, and they're trying to compete against that shiny new penny down the street that was built maybe in 2020 or 2019. And they're just, people walk through and they think, I've just got a great reputation, but it just doesn't look as good as these newer communities. What a great opportunity to increase that. So that's something that I am seeing personally. And I think that that's a big opportunity. And certainly the data that you just laid out matches that kind of turn and focus. Like you just said, it'd take four or five years to get something out of the ground there. Okay, big topic of conversation around that. And it seems like, look, I'm no finance expert. No one is gonna come to me for investment advice and financing and capital stack, but I am afforded this kind of front seat to these type of conversations. And it seems like, yes, these new developments, they're not penciling out because largely it seems be the interest rate, right? This interest rate that has been kicked around for a number of years. When is it gonna go down? Is there gonna be a cut in the rates? How are investors going to overcome this? What in the capital markets, what's gonna need to shift? Is it solely the interest rates that are gonna need to shift so that people actually start these new developments? What are some of the key metrics around this that you're seeing? Yeah, I think it's probably, I mean, if you kind of sat down and looked at a, you know, a pro forma for a new development, I mean, you know, your key drivers are gonna be obviously occupancy rate, construction cost, and you know, kind of labor cost, right? I mean, those are probably the kind of the main, and then interest rate, of course. And so, you know, occupancy, I think we're entering a cycle where those fills and those occupancy rates are likely to kind of go very high. You know, we have a graph in there where if you kind of just project current performance forward, I mean, the industry's looking at 95, 97, 99% interest, excuse me, occupancy rates probably won't play out exactly like that, but I mean, if you just kind of do the simple math of population growth, minus supply growth, and what does that mean, right? So I think occupancy's in new developments. We're entering a world where you can start to push that up and on the right side, obviously, if we enter a world of kind of constrained supply and basically a demand overhang, you would expect to see, you know, rates outpace kind of cost, that would be, you know, that's typical kind of an econ 101, right? So I think there's probably some rate appreciation that can help bring more new supply into the market, you know, and it's really that ratio of kind of rent over labor. And so, you know, I think there is a decent case that in the short and medium term, you know, rents, maybe should outpace outpace wages as, you know, you kind of have this supply and demand imbalance. And then obviously, you know, there's construction costs and interest rate, you know, I think construction cost of kind of growth has certainly another piece of the puzzle. You know, I think that there's obviously creativity in the development community on how do you try to economize and still develop a quality product that can probably be done value engineering, obviously, is one piece of it, you know, as you're seeing some of the air kind of being let out of the economy and inflation, some downward pressure on inflation, goods input inflation, all that kind of good stuff, you know, hopefully that will help moderate construction costs. I do believe we're seeing some of that is what the data says. And then obviously, lastly, it's kind of both capital availability and the cost of capital are kind of the two pieces, right? I mean, you know, your cost of capital is not only a function of the interest rate on your debt, but if you only get 50% leverage and you're having to use 20% equity for 50% of it, then you're blended. It's really that you're blended average cost of capital there. And so, you know, I think as we see a more accommodative rate policy and hopefully, you know, kind of banks starting to lend a lend a bit more, I think hopefully we'll see better terms, so basically higher leverage effectively, which would, you know, which will bring down the weighted average cost of capital and then obviously, you know, a lower rate will also, you know, kind of bring down the average cost of capital. So I think those are the moving pieces. I think they're all kind of starting to trend in the right direction. I think regardless of whatever they look like, the reality is that if we, you know, if we kind of muddle along for the next two or three years and people still aren't starting projects, what's going to happen is there is going to be, you know, so many 97 and 98% built up, you know, so much product that's that 96, 95, 90, whatever percentage occupancy that that's going to make projects pencil. I mean, that's just how the economy works, right? If there's not enough, if demand outstrips, supply, price goes up and then eventually that will make a lot more projects pencil. So that's what we're looking at here. You know, I think regardless of what the Fed does, but obviously, you know, if we start to see some rate cuts and we start to see the banks lend a little bit more, I think that probably kind of starts to pop the top a little bit. That makes a lot of sense. Both having high rates and also high labor costs, obviously, these are the challenges in these barriers. And frankly, I'm personally surprised that the labor is still so expensive. There's got, I think that the dam is going to break on that at a certain point. But I look at construction costs on a daily, weekly basis. And I'm still surprised of the numbers that we're seeing out in the construction force and in the labor force. So these are definitely some challenges. And kind of how you ended there was kind of looking at some opportunities. So let's talk about opportunities now. What opportunities, you know, in current supply and demand, those imbalances, they present to developers, investors. I think you started to kind of outline that. I'd love to get some more of your thoughts. - You know, one thing that we talk about in the outlook that I think is very interesting, we took kind of, we looked at 75, the net worth and income of 75 plus households from, you know, it's all normalized for 2022. And you basically look at that as a ratio, you kind of look at that historically, both income and net worth against the cost of senior housing. And kind of say, all right, like where is the median senior housing, you know, kind of perspective consumer, right? And so, you know, what that data tells you is that the relationship between the median, not the average, the median. So this is the 50th percentile household, 75 plus household in the United States of America. The ratio of their income and net worth to senior housing has never been more favorable. They have never, the boomers are the richest generation in history, by a long shot. Obviously that is somewhat top weighted, but even the median, you know, and so basically median income and net worth is grown over the last 10 years by about 35% in real term. In real terms, not in nominal dollars in real terms. Meanwhile, the cost of senior housing has increased by about 7% in real terms. So, you know, you have a median kind of perspective consumer who is significantly more able to afford the product than they were a decade ago. And so, you know, I think, I kind of start there. I think that's important. And so I think really if I, you know, if I was kind of putting dollars to work, you know, obviously on the development front, there are markets where deals pencil. You just got to go find them, right? And so, you know, what it's getting into the right rate here in the right space, because there are markets in the, you know, in this country that are have, you know, 35% 80 plus growth and, you know, income qualified 80 plus growth and no active projects in the pipeline, right? There's just, there is opportunity there, both from a new product perspective. But then, you know, I think obviously from an acquisition perspective, you know, there's an operative, the class A stuff trades, because, you know, the agencies are still lending. And, you know, if you pick stuff in the right markets where there's not a lot of new supply coming in and there is still that, you know, very strong population growth, then, you know, you're probably going to be able to see, you know, maybe not as much on the occupants aside, but you're probably, they're going to see rate appreciation that, you know, can be very creative to the bottom line. Obviously, outside of that, I think what you identified is spot on, which is there's a lot of product that's old. There's a lot of senior housing properties that are old that are incredibly well, incredibly well positioned with respect to the market that they can serve or do serve. And, you know, I think finding, hey, this building has, you know, it could, with a $2 million of investment, right? You know, some UTOs and common space refresh and repositioning or, you know, conversion memory, you know, whatever the right playbook is. You know, this old building that might, you know, look like an eight and a half cap or an nine cap building right now can be repositioned, you know, into a kind of, you know, from an old long board into a very, you know, fast, kind of big waveboard that, you know, right as a wave starts to break. So I think there's some really creative kind of market analysis that can be done where you can pick some great spots, put some, you know, a little bit of money into the buildings and kind of reposition that and really capture this five or 10 year period where supply just won't be able to keep up with demand. I mean, those are the kind of the striking opportunities to meet. - And a lot of these buildings are in great locations, locations that you just can't even get today. And, you know, so there's our, you know, kind of double opportunity there. - In the care industry, if you don't have strong labor management, you don't have a business. If you aren't reaching out to a trusted HR partner, you can start experiencing high turnover, HR and clinical fines, uncontrolled expenses and low resident satisfaction. - ProCare HR is the only HR solution exclusively serving the care industry. If you're ready to get control of your labor management, reach out to procarehr@procarehr.com. - This kind of makes my mind wonder about the tertiary markets and how this may affect it. There seems to be over the past number of years this kind of push out of major cities for young families. And as we know, these kind of adult daughters, adult sons, the grandparents, these aging, you know, adults are, they're wanting to live near their family members. And I'm wondering how that would affect the tertiary markets. And when you compound all of these challenges in this kind of push out to the homesteaders, you know, they're kind of moving out of these, you know, the Chicago's, the Dallas's, you know, these kind of big, big cities kind of going out into some of the suburbs and some tertiary markets. How do you think that that's going to affect? Do you think that there's maybe a new or an opportunity there for a focus on some of these maybe kind of forgotten senior living communities that are out in these kind of, you know, tertiary market places? Do you think there's an opportunity there? - Absolutely. I think what you define as tertiary markets, you know, is it varies, right? So, you know, I'm based in Raleigh, North Carolina. So, you know, I kind of use a local example, right? I mean, you know, if you went out to like Clayton or Fuquavarino, which are kind of, you know, second ring or third ring cities around, you know, the metropolitan area, you know, what people call that a tertiary market or not. I think, so I think there's a little bit of that, which is, you know, where are you, what do you call in a tertiary market? If it's something that's closely attached to a, you know, a large and booming metropolitan area where families who might have previously tried to live close in and a smaller house close in because they, you know, had to commute, now can have a little more freedom to go out into a more bedroom community that's further out. I think that, I kind of put that in one bucket. Obviously, if you're looking at something that's like kind of truly, you know, a rural tertiary community and, you know, rural, you know, Kansas or something like that, you know, I kind of put that maybe in a little bit of a different bucket. But I think, I think at the end of the day, you know, that the kind of considerations are the same. So one thing that I think is a, it's an underappreciated challenge for the United States of America and it's not just our challenge, it's really the whole healthcare economy's challenge, is that you have a lot of seniors who are still in those kind of that second bucket, right, in a, you know, call it a rural Kansas type of town, but you might not have a lot of younger people who would be the staff, right? And so I think one of the first things you got to do is you're not, when you do your demographic analysis, you want to look at not only, you know, your seniors, you're also your adult children, but you also want to look at that workforce and what does that look like and how is that going to change over time? So I think that's one of the first things you've got to look at is just like, is the staff available to staff many of these buildings because a lot of these buildings in those types of markets, you know, at the end of the day, they can't get the staff and they certainly, the rate power or the rate of, you know, that rate power or ability to pay kind of isn't there, but the staff, and the staff's not there, so they're going to have to pay a premium and they're competing with the hospital and the skilled, I mean, they're competing with a lot of people for that, a very dwindling or finite pool of labor. So I think a lot of those folks are, you know, are facing kind of a existential, you know, erosion of kind of, you know, margin that, you know, will challenge their ability to kind of remain a going concern. So I think you got to really look at that as kind of a, all right, well, is labor going to be here? But then I think, you know, to your larger point, I think there are a lot of these kind of, you know, secondary bedroom communities where you're seeing a lot of that. And so I think what you really do want to look at is that kind of adult child side and say, all right, like, where are we seeing, you know, where are there buildings that were, you know, five or 10 years ago, this was kind of, you know, not somewhere you might have wanted to be. Well, post COVID, now we're seeing that migration come in and it's the right type of migration. I mean, that's all, you know, we actually have a lot of that type of data, we look at the psychographics and the income levels and all those sorts of things. And so I do think there, you know, you kind of got to really go and then pick apart each market. But there certainly are a number of opportunities like that, you know, kind of really across the country. You know, you mentioned margin. Let's make this our final kind of topic to go over. You know, and I've heard this throughout my career. This, you know, kind of phrases, you know, mission and margin. And then coming, you know, kind of through COVID and after COVID, like clearly there was a huge cost associated with that that is very difficult to pass on. And I'd love to get your thoughts on the data surrounding margin as it stands now. And what is the opportunity in the future? When you talk to people in the industry, right, you know, I think there's obviously kind of where you, you know, where you sit is where you stand. And so, you know, folks who bought a bunch of buildings in 2018 or 2019, you know, with cap rates, interest rate environment, you know, cost structure, et cetera, et cetera, they're going to have one perspective on kind of what the world looks like. Folks who, you know, if you came in today, right, with a blank, you know, just a blank slate and looked at it and said, you know, well, margins are what margins are. What are they doing going forward? 'Cause that's my investment time horizon. You can probably have a very different perspective. And so, we looked at, you know, margins at agency, finance buildings, and we also looked at margins in the publicly traded portfolios. And, you know, what you find is that the margins are increasing, they are growing and, you know, they're growing healthfully when you kind of project that forward. And some of the folks who make projections on those sorts of things, you know, are expecting senior housing to be, frankly, one of the best performing asset classes in the near term. And so, you know, I think that's, to me, that's kind of the backdrop of margin. I think if you said, well, where are we at? So something to think about is, you know, senior housing is really at, call it at 70, 80% occupancy, you know, where the industry were past that. I mean, it's pretty much a fixed cost business, right? You know, you're here to get some food costs, you know, you get some little costs here and there for those, if you have 100 unit building, if you have 80 residents in the building, adding 10 more residents, yeah, you'll have a slightly increasing cost, but it's going to be pretty small, certainly relative to the amount of revenue. You're getting, you know, 70, 80% plus kind of gross margins on those incremental residents. And so, you know, when you think about what's happened to margins, you've had kind of margin erosion with respect to, you know, labor and goods inflation kind of outpaced rent growth for a period of time in a relatively significant way. Now, historically, we had done pretty well at kind of keeping that constant or that in balance. And we've done pretty well since the inflation crisis has kind of come down and the labor crisis has come down. But so we did have this period of kind of cost structure inversion that, or cost structure growth inversion that, you know, we're going to have to work our way back out of. But on top of that, you know, we saw occupancy decline significantly. And so obviously, you know, if you take those marginal residents off, you know, and you're getting them at pure margin, that's going to have a very significant impact on margins. And so, you know, when people talk about margins, there is that relationship of rate to cost that's important. And we may have taken a step back there. But the other side of that coin is that, well, if the industry was oversupplying itself, overbuilding for a decade, and we had kind of driven our steady state occupancy down to 87 or 87 and 1/2, which is about where we were in the, you know, the late teens or late 10s, you know, but now, because of this demographic surge, we're going to see that go to 92 or 93. Well, that extra 5% occupancy, I haven't done all the exact math, but is probably likely to drive a steady state margin that is higher than it would have been if we were back at 87 and 1/2%, but we didn't have that inverted, supplied to a kind of cost and rent growth, struck a kind of growth rate. So, you know, I think on margins personally, I think that occupancy growth is, you know, obviously a very good way to grow margin. And so, I think that, you know, the kind of coming projected occupancy boom is likely to do a lot to repair those margins. And then when you have really high occupancy and not enough, you know, a lot of demand and not enough supply, obviously that's, you know, the natural thing of a way the market works is that it will push prices above cost. And so, you know, I think you're likely to probably see some of that margin captured to a point where, you know, if you sat down and said, hey, the industry's at 95% occupancy steady state and it's been able to drive some rate because it is, you know, you might end up in an average, a better average margin environment than you were before COVID. So, I think it's an interesting and complex picture. We're gonna do some more analysis on that. I mean, you gotta make a lot of big kind of assumptions. But I do think it's interesting to kind of look at those side by side and say, well, how much of our margin loss is rate? Everybody kind of says, oh, we lost all this margin. That's because, you know, labor costs just spiraled on us. And you're like, well, maybe it's also because you lost a bunch of occupancy. So let's kind of put those side by side and see how much is attributable to kind of each part of that. And then look at the question going forward and see, all right, well, what is the future hold in those regards? - You know, I'm in general, I'm wired to be an optimistic guy, but I think even the biggest pessimist sitting, listening to this episode, you've got to see the opportunity that is really at the doorstep. I mean, it's here in senior living. I hear a very optimistic present and future for the industry. And I love how you have laid this out, very thoughtful. And also, I think a very measured and very fair approach to this conversation on kind of some complicated topics surrounding the data in the industry, really appreciate a very fun conversation. - And for your time today, any final thoughts? - No, I would encourage everybody to get a hold of it, to get a hold of that market outlook, read through it. If you got questions, comments, you disagree with something, shoot us a note. If there's additional areas of research that you think are interesting, we're happy to kind of take those under consideration and try to pursue them a little bit. But I think it is, we are at the start. You could quibble with whether or not the historic absorption numbers we're seeing are the first laps of that wave or whatever, but regardless, in two years or three years, it's not really a debate anymore. So we are sitting on the cusp of a generational kind of opportunity. But I also, the thing I'd leave you with is, I think it's not only a generational opportunity. Great, we can, as an industry, do well. But it's also a kind of a generational responsibility. So at the end of the day, what we do do is we build care services for people in vulnerable folks. And people's loved ones at the end of their life. And that's really a sacred responsibility for, obviously anybody who's been involved with it or had a loved one in senior housing. You know what the difference between kind of, how stressful that process is, how hard that process is, how fraught that process is. And what the difference between a bad experience and a great experience and a okay experience are. And that is a sacred trust that we get and we get the opportunity to kind of do well while doing good, which is one of my favorite things about this industry. And so when you step back and look at this, not just from as an investor or as an industry stakeholder and say, wow, look at all that demand. But when you kind of step back and look at it from a societal perspective, you say, wow. Imagine a world where there's all kinds of markets where people can't get their loved one in to for memory care when they need it. Or assisted living when they need it. You know, and imagine the stress and the challenges. And frankly, the regulatory scrutiny that's gonna bring. And so, you know, I think as an industry, I kind of will see this as a bit of a clarion call that, you know, we do need to kind of really start to kind of wrestle with the fact that we're gonna need to put more product and in the hands of consumers and we're gonna need to do it quickly. And, you know, if we don't, it's going to be not only a problem for us kind of vis-a-vis, you know, probably the regulatory scrutiny that'll build our bring, but it's also gonna, you know, kind of be, I think, a letting down of society because, you know, they're gonna look to us to provide the healthcare services and the care services and the social environment and kind of all of that, that their loved ones need as we see this, you know, time of kind of unprecedented growth. A remarkable rally cry from one of the smartest people in the industry on this topic. Eric, I really enjoyed this conversation and I know that our listeners out there, they're gonna wanna know more and they're gonna wanna dive in to the tools that Nick MapVision offers. And so, go to those show notes. Nick MapVision is an incredible supporter and putting out this content freely to our industry so that you can benefit from it. Thank you so much for your time today, Eric. Really appreciate it. - Thank you, Lucas. It's a pleasure as always and anytime. Thank you so much. - And go to btgvoice.com, access this content and so much more. Hit us up on LinkedIn. We'd love for you to be a part of this conversation, especially those executive directors and the people on the front lines that are actually in the field, in these communities and seeing this happen in real time. We'd love to get your perspective on this and thanks for listening to another great episode of Bridge the Gap. We're listening to Bridge the Gap podcast with Josh and Lucas. Connect with the BTG Network team and use your voice to influence the industry by connecting with us at btgvoice.com.
