Independent Living Heats Up Senior Housing Industry—Again

The senior housing industry has been booming since the end of the recession, prompting some in the sector to return their attention to an asset that struggled during the economic downturn: independent living.

Whereas independent living was among the most popular property types pre-recession given its low barrier to entry and apartment-like setup, the economic downturn took its toll on the asset class, placing both new construction and renovations on hold. In recent months, however, independent living construction has been on the rise, leading some in the industry to believe it’s making a comeback.

“For the last three or four years, no one wanted to talk about independent living, but now, I’ve heard it from almost 80% of the people we’ve talked to, saying they’re going to go back and add an independent living piece,” Mike Garbers, a seniors housing managing director at Greystone Real Estate Advisors, told Senior Housing News. “It’s kind of interesting to see it come from being the big favorite to being totally out because it didn’t hold up quite as well in the recession as everybody thought—because it wasn’t as need-based—to a ton of talk that I was not anticipating.”

Independent living and continuing care retirement communities (CCRCs) are set to lead the way in terms of occupancy moving forward, according to a report recently released from real estate investment, financing and research firm Marcus & Millichap. As a result, independent living has been viewed as increasingly valuable, with new capital flowing into the industry and senior housing professionals pointing to new development as a significant investment opportunity overall in the coming year.

Not So Fast

To claim that independent living is experiencing a resurgence is perhaps stretching its comeback too far, Liz Bush, senior vice president for senior housing marketing and sales for Life Care Services, told SHN.

“I don’t know that there necessarily feels like there’s been a significant uptick in independent living,” she said. “But now, even the more traditional financing is more flexible, creating the sense that they can get back into the market and resurrect their plans.”

This means that LCS’ client communities that paused their independent living plans prior to the recession are picking up where they left off, Bush said. LCS has a group of companies that provide a range of services, including strategic planning, operations management and marketing and sales management.

“We are seeing a lot of activity within our clients where we have CCRCs moving forward with master plans and adding IL,” Bush said. “They’re feeling comfortable adding that, and the market shows it can take it.”

A Selling Point

The fact that independent living is being incorporated in more communities is something investors like Capital One find attractive.

“I prefer independent living, actually,” said Imran Javaid, Capital One’s managing director of health care and specialty finance. “In fact, I get a little nervous when it’s just a standalone facility that’s memory care. To me, I like the independent living, assisted living, memory care or skilled nursing facility all in one place, because I think from a consumer standpoint, it’s a really good value.”

Having an independent living component gives a provider something appealing to focus on in making sales to prospective residents who do not want to contemplate their increasing need for assistance, Javaid emphasized. That said, independent living is not immune to the acuity creep seen throughout the senior living industry.

Independent living might therefore include residents with more needs, which are met by adding services such as home care aides. Capital One recently completed a “very successful project” in this IL-plus-services vein, Javaid said.

In fact, independent living is becoming a selling point when it comes to making deals in the senior housing space, Cody Tremper, a Greystone seniors housing managing director, told SHN.

“We recently sold a portfolio, and the pitch was that it’s majority independent living,” he said. “I’m not sure if it’s the biggest opportunity, but it’s definitely coming back.”

Written by Kourtney Liepelt