Development of luxury senior housing is not slowing down, despite challenges related to land acquisition and the recent economic downturn.
While the economic recession might have hindered the appeal of luxury options for many prospective residents who saw their home values plummet, those in the business say they are not restricting the pace of their product offerings.
In 2009 during the heat of the recession, Belmont Village Senior Living opened two luxury communities in the affluent California areas of Cardiff-by-the-Sea in San Diego County and Westwood in Los Angeles.
Despite the projects opening during the worst part of the recession, Co-Founder and CEO Patricia Will says they have been two of the most successful communities Belmont Village has constructed in the history of the company, in terms of lease up and rapidity of occupancy.
Households saw their net worth plummet nearly 40% (38.8%) during the throes of the recession from 2007-2010, according to data from the Federal Reserve Board’s Survey of Consumer Finances. This decline, the survey noted, was driven strongly by a broad collapse in home prices.
But while the economic downturn may have impacted prospective residents’ incomes and home values, it did not alter their decisions to move,” Will says.
“The market has always been there,” says Will. “The key has been that people who could otherwise afford to stay home recognize the value of amenity packages and underlying care services.”
Those amenities are also becoming more high-end, from spacious units to state-of-the-art fitness centers, multiple dining venues, indoor and outdoor swimming pools—even ones filled with saltwater—and concierge-style services that provide these communities with a hotel-like environment.
Demographics, as well as consumers’ demands for personalization of services are helping fuel the luxury market’s growth, says John Cochrane, CEO of be.group.
“Consumer expectations around well aging have changed in the last 20 years,” Cochrane says. “People are looking for more engagement than before and there’s an awareness now that the industry hasn’t had before in the past.”
“Well aging” relates to a variety of shifting consumer perceptions about individuals’ lives today and what they can accomplish later in life, says Dan Hutson, vice president of communications and marketing for be.group.
“The years beyond 65 are increasingly seen as having much greater potential for being active, rich and purposeful than they once were, and people are seeking support in achieving these aspirations,” Hutson says.
be.group’s White Sands La Jolla community in La Jolla, California, incorporates a full continuum of independent living, assisted living, skilled nursing, memory care and home care. The community has been operating for 50-plus years, according to Cochrane, and while its residents range from moderate to more “significant” incomes, a common thread throughout the community is one of engagement and well aging.
Although luxury senior housing communities might have more pricing latitude when it comes to being able to afford and provide concierge-style amenities, acquiring land for development creates significant barriers to entry.
“One of the biggest challenges is finding land for luxury communities, especially as sentiments are shifting away from retirement communities out in the boonies,” Cochrane says. “People want to stay connected to cities and services these areas provide, like transportation and other cultural attractions.”
As a result, luxury communities that typically require a lot of area space may find it more expensive to find land to purchase for construction, as the sites call for infill developments located closer to populated areas, rather than secluded miles away from metros.
Also, competition from multifamily investors creates another obstacle for high-end senior housing developments.
“Any parcel in a good urban or suburban market faces strong pressure from multifamily investors,” says Cory Alder, president of Nexus Companies, a California based real estate firm that recently opened its $62 million Vivante on the Coast luxury community October 15.
Vivante on the Coast, located in Newport Beach, California, provides luxury living options for seniors in 185 resort-style units, 40 of which provide specialized care for memory-impaired residents. Monthly rents range from $4,000 to $7,600 per month.
One of the community’s biggest challenges was not whether or not residents would be able to sell their homes and make the move post-recession, but that lower returns on costs for multifamily developments would create competition.
Having just opened mid-October, Vivante is seeing, on average, five residents move in per day—and that’s by choice, says Alder, to provide special attention for the new residents during their move-in process.
Vivante is the first luxury-style senior housing community from Nexus Companies, but it will not be the last, as Alder says the company is looking to do two or three more in the future, primarily in California.
The company will join others in the high-end market, which has shown activity picking up as of late from a number of developers entering the space—one of the most recent players being Avanti Senior Living, a Texas-based operator with leadership experience that includes ties with Marriott.
While land acquisition continues to be a challenge for many senior living developers looking to embark on luxury communities, one must have a great deal of patience when it comes to zoning and approval processes.
“At the end of the day, once you have real estate it’s all about the execution,” said Will. “The more precious the real estate, the more difficult it is to get it. It takes a lot of fortitude.”
Written by Jason Oliva