Clustered Memory Care Development Leaves Vast Opportunity

| May 22, 2013

Development activity for memory care is far outpacing that of other senior living sectors, but oversupply isn’t a concern considering the concentration of projects in a few hot markets and staggering upcoming demand.

The numbers are eye-opening: More than 5 million Americans aged 65 and older are currently living with Alzheimer’s disease, a number expected to jump 40% to 7.1 million by 2025, according to the Alzheimer’s Association. 

By 2050, the number of 65-and-older Americans with Alzheimer’s may nearly triple to 13.8 million. Already, one in three older Americans die with the disease or other types of dementia, according to a recent report

In contrast, the existing memory care inventory numbers less than 75,500 in the top 100 metro areas tracked by the National Investment Center (NIC) for the Seniors Housing & Care Industry, and developers are gearing up for impending demand. 

On a rolling four-quarter basis, construction starts as a percentage of overall inventory for memory care stood at 5.7% as of the first quarter of of 2013 in the top 31 markets NIC tracks, significantly more than all other sectors of senior housing and care. 

Assisted living starts versus overall inventory were at 2.3% in comparison, and just 1% for independent living. The relatively high percentage for memory care overall has a lot to do with the sector’s small existing base, explains Chris McGraw, a senior research analyst at NIC. 

“Freestanding memory care [in particular] does have quite a bit of construction and it’s grown very rapidly because one, they’re starting a fair number of units, and two, because there aren’t a lot of existing units,” he says. 

There are just under 49,000 memory care units in the NIC MAP31 compared to nearly 193,000 assisted living units and around 265,700 independent living units, and many new starts are clustered regionally. 

“The starts might seem like a lot versus inventory—5.7% is certainly very high compared to other property types—but it’s heavily concentrated within a few markets,” says McGraw. “It’s really going to only impact a handful of markets, while most markets in the country aren’t really going to face supply pressures.” 

Texas has two of the MAP31′s top five markets for memory care units under construction, which McGraw partially attributed to the state’s overall accelerated construction activity thanks to a healthy economy and steady job growth. 

In Dallas, 502 units are currently in development with an existing inventory of about 2,600 units for a 19.28% construction versus inventory rate. Houston’s rate is even higher, at 25.8%, with 460 units currently under construction to join an existing inventory of nearly 1,800 units.

Atlanta (10.25% construction vs. inventory), Chicago (6.41%), and Denver (17.91%) round out the top five MSAs with the most memory care activity. Across the country, several developers have multiple projects underway and many more are working on a smaller scale. 

The LaSalle Group is currently developing 322 memory care units under its Autumn Leaves brand in Georgia, Illinois, Texas, and Oklahoma. Six of the Irving, Texas-based developer’s seven projects are located near hot MSAs. 

New Perspective Senior Living, based in Eden Prairie, Minn., recently opened a new memory care project in Sun Prairie, Wisc. with an upcoming Glendale, Wisc. project on the boards, says CFO Ryan Novaczyk. Expansions at two other memory care communities in Mahtomedi, Minn. and Brookfield, Wisc. are also planned.

Only about 30% of MAP31 memory care units are in stand-alone communities, but with developers such as The LaSalle Group and Silverado Senior Living focusing exclusively on stand-alone communities, that trend is starting to change. In recent quarters, the construction vs. inventory rate for freestanding memory care has been outpacing that for overall memory care development. 

Currently, though, a majority of memory care units are found in communities that also offer independent or assisted living or in care-continuum campuses, NIC data indicates. 

The Leo Brown Group, another active senior living developer, has two Indianapolis-area projects underway with a third commencing this summer in the Columbus, Ohio area. There’s also a “robust pipeline” slated for upcoming quarters throughout the Midwest, according to vice president Mike Wagner.

Out of the 274 units either under construction or about to break ground, 79 are designated for memory care, with the rest a mix of assisted living and independent living. 

“We are certainly not opposed to considering stand-alone memory care opportunities but obviously the market has to be right for us to deviate from our model of assisted living and an attached, secured memory care wing,” Wagner told SHN in an email. 

The MAP31 markets with the lowest construction vs. inventory rates for memory care include Las Vegas, Miami, St. Louis, Mo., Pittsburgh, Pa., San Antonio, Texas, and San Diego, all with no units under construction by the end of the first quarter of 2013. 

Written by Alyssa Gerace


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Category: Alzheimer's Care, Development, Senior Care, Senior Housing, Senior Living

Comments (2)

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  1. Overbuilding IS a concern!!! Don't just look at the numbers without digging in. Yes, the prevalence of Alzheimer's is increasing. But many seniors with early stage Alzheimer's do not need to be housed in a locked down dementia care facility. Further, with the cost of dementia care generally running 60 k a year or more, ability to pay will place significant limits on demand for new projects. Some markets are already seeing declining occupancy and slowing absorption rates. Developers should proceed cautiously and fully understand the true demand for private pay dementia care.

  2. Dave Wiltsee says:

    Dementia care education and training must be made a high priority for millions of caregivers, especially for family and non-medical personnel caring for the elderly who are "aging in place".

    Granted, institutional care should be more broadly available and accessible.

    However, virtually all seniors afflicted with dementia will develop early symptoms while living in ther own homes. And the vast majority will require the care and understanding of non-professional caregivers long before they take up residence in a qualifying memory care facility — if ever.