Despite Slow Recovery, Memory Care Still ‘Enormous’ Opportunity

As construction levels of private pay seniors housing properties continue to trend up, memory care is seeing the largest percentage increases in construction, according to data released Thursday by the National Investment Center for Seniors Housing and Care.

But occupancy remains low, relative to the recent past. In its latest NIC Investment Guide, drawing on data from the fourth quarter of 2013, NIC notes the gap between occupancy and construction in the sector’s hottest property type: memory care.

Memory care property types totaled 1,060 in the fourth quarter of 2013, carving out a chunk of the $330 billion total value of the seniors housing and care property market, data show.


Yet occupancy in majority memory care properties was 85.6%, down from a high of 92% in the first quarter of 2006.

A projected lack of caregivers — 85% of whom are currently family members, is expected to push overall demand for senior housing, analysts say, noting that data suggest that between 2010 and 2030 the caregiver support ratio will go from seven potential caregivers for each person in the high-risk years of 80-plus, down to four.

“It’s huge for our sector and means there is enormous opportunity [for senior housing products],” said Bob Kramer, president of NIC during the 24th NIC National Conference in Chicago on Thursday, adding that in addition to new memory care construction existing housing models are repositioning themselves to meet the growing need for memory care.


“There continues to be more growth in terms of assisted living and memory care, versus independent living, skilled nursing and continuing care retirement communities [CCRCs],” Kramer said. “CCRCs are renovating. And, many assisted living and independent living operators are converting floors or parts of their buildings for dedicated memory care.”

Of the 1,060 properties for residents with memory impairment, only 965 are freestanding memory care models, and the remaining 95 properties that offer memory care provide it along with other care segments.

In the past year and a half, the inventory of memory care units has increased by 3.1%, far outpacing the supply growth rates of the other senior housing segments.

More than two-thirds of the memory care units in existence within the 99 largest metropolitan markets have been developed since 1995, with 49% of the current supply being built between 1995 and 2004.

And while the metro areas of Texas and New York corner 22% of senior housing construction among the top 10 metros, analysts say concerns of over saturation are unfounded.

“With so much new capital coming into the space we fully expect to see more growth and more new development,” Kramer said. “In many ways it’s going to be good for the consumer. They’ll be able to have options, [they’ll be able to choose] a product built in 2015.”

In addition, 73% of respondents to a NIC/NREI Special Survey Report said they think while more construction of all property types is on the horizon they do not see overbuilding as an issue.

The challenges facing under-developed markets are labor availability and wage pressures on staff that are emerging in the industry, said Beth Mace, chief economist and director of capital markets outreach for NIC.

In addition, senior housing construction trends mirror those of commercial real estate, Mace said.

“It goes along with the sentiment regarding all property types in real estate,” she said.

Written by Cassandra Dowell

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