We could see improved usability, tracking, cameras, controllers, headsets ergonomics... but none of those appears to be a genuine 'gen-2' event.
Increasing resolution is the obvious 'gen-2' trigger, but AFAICT the very best hardware available in 2016 is still going to struggle to run complex titles on gen-1 hardware. Adding more pixels seems silly.
If we had foveated rendering, then a resolution jump seems more likely, but AFAICT we'd need new rendering pipelines and very reliable tracking...
Based on what we've seen from HTC/Oculus, I'd guess 2-3 years before gen-2 happens.