For the next few weeks, Senior Housing News is taking a more in-depth look at our list of Top Development Locations for 2013. This second installment takes a closer look at some of Florida’s top market areas. Read the first installment here, and please note that SHN’s development list is not ranked in any particular order.
Like the rest of the nation, Florida fell on hard times during the economic recession, and the state didn’t add much new senior living inventory. But thanks to its higher-than-average senior population spurring demand even through the downturn, developers are turning once again to the Sunshine State as a top spot for senior housing development.
CNL Healthcare Trust, an Orlando, Fla.-based investment offering that acquires senior housing and healthcare properties, recently broke ground on a 96-unit assisted living and memory care community near Orlando and has previously done other developments across the state.
“We will continue to look to develop in the Florida market,” says Kevin Maddron, senior vice president of fund management for the healthcare sector at CNL Financial Group, which sponsors CNL Healthcare Trust. “We do see a lot of demand in the Florida market, and particularly where we see a lot of demand being generated is in major markets: Tampa, Orlando, and the West Palm Beach area.”
Orlando’s third quarter senior housing construction versus inventory rate, at 4.58%, exceeds the 1.99% of the top 31 market area profiles (MAP31) compiled by the National Investment Center (NIC) for the Seniors Housing & Care Industry.
The Central Floridian city had 404 units under construction as of the third quarter of 2012, followed by Miami’s 1.22% construction vs. inventory rate and 245 units under construction. Tampa is also on NIC’s MAP31 with a 0.75% construction vs. inventory rate and 137 units under construction.
With 17.6% of the population aged 65 or older, Florida’s senior demographic is well above the 13.3% national rate, according to U.S. census data.
Despite a previous article on development in North and South Carolina about people who “don’t get all the way to Florida” when they’re choosing a retirement destination, a substantial amount of people still gravitate toward the Sunshine State, according to Daryl McCombs, investment advisor for ARA National Seniors Housing Group out of Tampa, Fla.
“Recently, we’re seeing a few projects around central Florida,” he told SHN.
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The state has been dealing with challenged housing markets, but developers and operators have started looking at land again for new development because it’s been repriced, says McCombs.
“Six to seven years ago, that parcel that was being sold to condominium developers has now been reduced in price by a third, or even one-half—or more,” he says. “It’s ratcheted up the affordability, where senior housing developers can now fit per-unit price into their model where it makes sense, [whereas] it didn’t seven years ago.”
Another factor that makes Florida favorable for senior housing development is the emergence of assisted living. There’s been a moratorium on new nursing home beds, says CNL’s Maddron, but assisted living has filled a niche for those who prefer a more independent living style. Even better, he says Orlando has had a fairly high absorption of existing inventory as compared to the number of new units under development.
“We’re starting to see some development pick up from other developers,” says Allen Porter, director at Medical Development Corporation, which develops, owns, and manages senior housing communities throughout the Southeast. “When the economy crashed, development stopped, but the demand for senior housing kept on going up. There were waves of seniors, but not enough development to keep pace.”
Now that the economy is headed toward recovery, Porter says his firm is seeing some of the pent up demand come to fruition, and pegs assisted living as a good sector for more development.
“We like to look for locations outside of Tier 1 and Tier 2 [market areas],” he says. “We believe the population is still growing fast, just outside the perimeter [of the larger cities].” There are big retirement populations south of Naples and in Venice Beach, to name a couple, where there is still land open for new development, Porter says.
“The unique thing about senior housing is you’re trying to select areas that are close to regional providers of healthcare services, that are of value to seniors, and are close to adult children with access to activities,” Maddron says. “A lot of times when you’re looking for site selection, it could be a matter of price vs. being in the right spot. But there has been a decrease in land cost, as well as a very favorable financing environment.”
Written by Alyssa Gerace