Senior Living New Site Selection Looks Way Beyond Demographics

In the search for new senior housing development sites as well as acquisition targets, analysts and market experts say the criteria today spans well beyond traditional demographics and population statistics.

Population size and growth rate among the target demographic of older Americans who ultimately may move into independent or assisted living is one criteria in new market and site selection, but other considerations should also weigh heavily, participants said on a Senior Housing News webinar Thursday.

“What most people do is collect market data and then start qualifying it based on age and income,” said Michael Baldwin, executive vice president of Salus Valuation Group. “That gets you far enough to do a sniff test. But the more appropriate way to do it is to start looking at acuity levels in independent living. That’s a different set of assumptions.”

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Looking into the number of households that are ages 65 and older bears on the market selection for providers today, but additional information about the population can also present a strong argument for a new development site, said Aaron D’Costa, director of acquisitions for Virtus Real Estate Capital.

D’Costa points not only to the number of 65-plus households, but also those that fall into the 44 to 55 and 55 to 64 age segments.

“We look at the labor market,” he said during the discussion. “It doesn’t just influence the adult children but also the labor pool for a particular project.”

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With assisted living and memory care being more labor intensive product types, the workforce considerations become increasingly important, he says, in determining how accessible the site is to the local workers.

There may also be mitigating factors that weigh against going into a market with good demographics, such as regulations, unemployment insurance costs, and licensing requirements, as well as increasing considerations toward taxes, insurance and utility costs in attracting capital to new projects.

Additional analysis might also include a look into potential partnerships or proximity to specific populations, such as colleges and universities, religious organizations and veterans, says Dr. Grant Shumway, team leader for Revere Healthcare.

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Within different affinity groups or selected demographics, there may be very different opportunities.

“When you start thinking about working with a college or campus, there are [several] motives about what they’re willing to do,” Shumway says, citing a handful of case studies. “The motive is financial but the risk-reward scenarios may vary.”

Likewise, working in areas highly concentrated among veterans and former service members can present an opportunity or a challenge.

“If you’re going to do housing focused on veterans, the fact that you want them isn’t enough,” Shumway says. “What are you doing for them that appeals to them? Just because you build it they will not necessarily come.”

Some factors will ultimately weigh more heavily than others, depending on the business, its current positioning in the market, and its goals.

“If there is a market in a state where it’s highly regulated and there are hurdles to development and ongoing operations, while the demand may be there,  there are other mitigating factors to make the decision to go elsewhere,” D’Costa said.

Written by Elizabeth Ecker