With this fifth and final installment, Senior Housing News has presented an in-depth look at our list of Top Development Locations for 2013. Read the first installment on the Carolinas here; the second, on Florida, here, the third, on Georgia, here, and the fourth, on Arizona, here. Please note that SHN’s development list is not ranked in any particular order.
Senior living construction activity may have been down in the third quarter of 2012 on a national level, according to the National Investment Center (NIC) for the Seniors Housing & Care Industry, but Texas appears to be bucking that trend with a “growth explosion.”
More than one in ten Lone Star State inhabitants is 65 or older, accounting for 10.5% of the population. While that’s beneath national average of 13.3%, developers say they’re seeing an influx of boomers thanks to some of the state’s retirement-friendly attributes.
“[Texas] really has become a hotbed for snowbirders. People like to retire in Texas, because there’s no state income tax and the winters are mild,” says Michael Bellotto, vice president of sales for Harden Healthcare’s Long-Term Care Division. “We’re seeing an explosion of growth in certain areas.”
Harden Healthcare’s Long-Term Care Division encompasses TRISUN, a skilled nursing, rehabilitation, and assisted living provider based in Texas that recently broken ground on an assisted living and memory care community in San Antonio, Tex. in partnership with Suntex Development LLC. The new development is located next door to another TRISUN-managed senior care community that offers skilled nursing and rehabilitation services, creating a care continuum to enable aging in place, says Bellotto.
“Based on real evidence of what we’re seeing and hearing from developers, all of the major Texas markets are [picking up],” says Charles Bissell, director at Integra Realty Resources’ Seniors Housing & Health Care Specialty Practice.
He named Dallas and Houston as top development spots, and both rank high on NIC’s top 31 market area profiles (NIC MAP31) for their construction versus inventory rate and number of units under construction.
Dallas’s 3.99% construction versus inventory rate exceeds the NIC MAP 31 average of 1.99%. Considering units currently under construction as of the third quarter, it trails only Minnesota, with 923.
Meanwhile, Houston’s construction vs. inventory rate is even higher at 4.71%, with 654 units under construction. San Antonio, toward the bottom of the list with a 0.41% construction vs. inventory rate and 28 units under construction as of the third quarter, may present more opportunities for developers, especially as others trend toward overdevelopment.
“Some markets have become saturated,” says Bellotto. “In the Dallas area, we’ve seen some inventory pressure.”
For the most part, the possibility of over-supply is coming on the skilled nursing side. However, due to Texas’s certificate of need requirement for new skilled nursing beds, it’s not a widespread problem, and consumer preferences are trending toward newer nursing homes.
“What we’re seeing from an acuity level is that patients are sicker than they used to be, with the way hospitals are needing patients to [be discharged] sooner,” Bellotto says. “A lot of competitors are getting into the marketplace for skilled nursing. [Many of the centers are older] but consumers are looking for a new facility from an aesthetic standpoint.”
Consumer demand for memory care remains high. The LaSalle Group, headquartered in Irving, Tex., is developing multiple memory care communities under its Autumn Leaves brand, including its eighth in the West Houston metro area.
Meridian Realty Advisors, a Dallas, Tex.-based company, is currently developing two memory care communities in partnership with Silverado Senior Living in Austin and Fort Worth, and is planning the development of a care continuum campus including memory care, assisted living, and skilled nursing care in northwest Austin.
The increase in construction activity is predicated on certain conditions, though, says David Ronck, president of Meridian Realty Advisors. Projects located in strong markets with sound underwriting fundamentals, strong sponsorship and proven operating capability will get done, he says, though they may take more equity than what has been required in past construction cycles.
“While there seems to be a significant level of development discussion about most major Texas markets, the ultimate successful execution of many of these “discussed” developments is really dependent upon the accessibility of construction financing and sponsorship,” says Ronck. “We have seen more lenders showing signs of entry back into the market but we haven’t seen much in the way of a loosening of underwriting standards.”
Written by Alyssa Gerace