When it comes to senior housing development trends for 2013, all signs point to memory care playing a starring role for new construction—whether as an addition to an existing community or as a standalone project—with active adult communities attempting to stage a comeback, the industry agrees.
New development essentially came to a standstill during the worst of the economic downturn. Although current construction as a share of existing inventory remained flat at 2.1% in the second quarter of 2012 compared to the previous quarter, according to recent data from the National Investment Center for the Seniors Housing & Care Industry (NIC), this stabilization could be a sign that the industry is “at the beginning of a new phase in the development cycle,” says NIC MAP’s vice president Michael Hargrave.
As financing continues to loosen up, activity among investors and developers is gaining steam. There’s even interest from developers who are new to the senior living industry, most of whom are looking at the memory care space, says Margaret Wylde, president and founder of Oxford, Miss.-based market research firm Promatura Group.
But there’s a cautionary tale to be told, she says, adding that it’s “sort of scary” to hear this interest in memory care from “too many people—including people who are not [already] in the industry.” Pre-dating the glut of assisted living product that flooded the market in the early 2000s was an overdevelopment of memory care, she recounts, and it’s history that should not be repeated.
However, supply and demand metrics are becoming increasingly favorable to new development, and given Alzheimer’s and dementia statistics among the aging population, there is room for memory care—especially when it comes to adding those capabilities to existing CCRCs or assisted living communities so residents are able to age in place, she says.
Developers, investors, and operators active in the memory care space include Silverado Senior Living with partner Meridian Realty Advisors; The LaSalle Group; Thrive Senior Living with PinPoint Commercial; CNL Healthcare Trust, ABHOW, and PulteGroup under its Del Webb brand, to name a few.
There’s also “quite a bit” of activity going on in the active adult space, says Wylde. Most boomers are still relatively young and don’t yet need to enter any sort of retirement community, so instead of trying to sell a needs-based product, communities will need to focus on lifestyle, she says.
“[That community type] really was pushed down for a while, but now we’re working with a number of different companies,” says the market researcher. “They have definitely recognized the importance of understanding the customer and adjusting their product and vision for communities for the next generation of buyers.”
There are at least 44 active adult projects in planning stages, according to Wylde’s database covering the nation’s 100 largest cities, and that’s not a complete list.
Rather than needs-based moves into senior living, many are now looking for low-maintenance homes, reduced mortgages, and living closer to shopping and other amenities, although health issues are still a factor, she says.
For the under-80 crowd, the traditional senior housing product won’t be in too much demand for quite some time, says Elisabeth Borden, principal of Colorado-based consumer research and marketing firm The Highland Group. “They’re not old enough for it,” she says. “They’re looking for good-quality, market-rate apartments.”
In 2009, only about 3% of 55+ households resided in active adult communities, according to data from the National Association of Homebuilders, but the number of households correlated to that figure is expected to increase significantly (even if the percentage does not) as more households enter that age group.
There’s “lots of interest” in age-restricted communities for the 55 and older crowd, and the market-rate rental product in walkable communities is gaining ground, Borden says. While they might not need to move into a residence offering needs-based services, they could be attracted by communities offering concierge services or other sorts of coordination, whether for housekeeping, transportation, or social events.
“Lots of them are former homeowners who aren’t used to renting and may be nervous about bad neighbors,” she says. “If it’s age-restricted, that gives a little more peace of mind.”
Written by Alyssa Gerace