There’s plenty of room to grow in memory care, but it’s not a quick fix, say those who have studied the market and successfully made inroads into it.
“Is the product needed? Absolutely,” says Joe Weisenberger, vice president of senior housing for Health Care REIT (NYSE:HCN). “But the modeling has to be done right.”
The market for memory care units in the United States is just 1% penetrated, compared with a 10% penetration rate for senior living overall, according to market data presented by panelists at the recent NIC regional conference in San Diego. While providers and investors agree there is room to grow in the sector with memory care expected to boom in the coming years, it’s a different beast when compared to other forms of senior living development.
“The due diligence upfront makes or breaks the project,” says Ryan Novaczyk, CFO for New Perspective Senior Living. “I see a lot of deals where developers fail to get something off the ground—typically when they did not do their homework. They’ve spent on the plans, but it’s not going to work.”
A major consideration, even more so than in other types of senior living, is staffing to meet the residents’ needs, says Paul Mullin, vice president of development for Silverado Senior Living.
“The reason the rent is so high is we staff for the appropriate level of care as well as programming,” Mullin says. “To provide good care, you have to staff appropriately. Sticks and bricks is only about 5% of it. We carry quite a bit of overhead, particularly in staffing. If you’re not engaging people in memory care, they will get frailer.”
A second major point to consider is the style of the community whether small, individual units, or “cottages,” versus larger, more traditional buildings, or “mansions,” developers and architects say.
Both models have been used, with pros and cons to each and today’s designs working to make mansions feel like cottages through architectural techniques.
“With cottages, residents don’t have too much to learn or negotiate,” says Douglas Pancake, principal, Douglas Pancake Architects. “They’re also associated with with reduced levels of environmental stress with less choice, decision and competition.”
Silverado has built a model based on a “neighborhood” approach with 30 to 100 beds being its “sweet spot.” Within the model community, there are four neighborhoods at maximum with about 15 units per neighborhood.
“Removing dead ends will bring residents back,” Pancake says. “The floor plan can act as an environmental device.”
While Silverado has successfully built and reproduced this model across the United States, it is not a concept to rush into, executives say. Market research and demand analysis is increasingly important as a factor that can make or break the success of a new memory care community.
“When you see a market that looks really good on paper, you don’t really know until you get into the communities,” Mullin says.
That includes surveying competition inside and out, developers say.
“You can build the best building, with a good location, but somebody’s coming in at the same time… I see that often,” says James Tellatin, principal for Tellatin, Short & Hanson, Inc. “Quite often, there’s no awareness you have competition coming in alongside. See what else might be in the pipeline. Interview competitors. There could be state regulatory departments that can provide insight.”
Written by Elizabeth Ecker