Strength of Luxury Senior Living Market Holds Lessons for Industry’s Future

Middle-market senior living has commanded a lot of attention recently, with demand set to rapidly expand in the coming years. But luxury senior living continues to hold great appeal for developers, investors, operators and — most encouragingly — consumers.

Watermark Retirement is certainly not shying away from the luxury market.

The Tucson-based company’s development pipeline is entirely focused on high-end communities, Chairman David Freshwater told SHN last week. And, Watermark’s recently opened community in Brooklyn Heights took the top spot on a recent list of the priciest assisted living communities, as compiled by LivingPath.

But Watermark is just one of several organizations targeting the most affluent senior living consumers, and the strategy appears to be well-founded, based on data showing that demand for luxury communities remained strong during the Covid-19 pandemic.

Even companies that are not targeting the high end of the market should be paying attention to Watermark and other companies that are creating new operating models in luxury communities, which could increase the appeal of senior living to aging baby boomers and might be adapted for lower price points.

Resilient demand

Not surprisingly, the priciest senior living communities are dominated by recently built properties. Half of the communities on LivingPath’s list — 16 buildings — opened since 2019, including six that opened or are slated to open in 2021.

Hover over chart to see community names

But out of all the priciest communities, 61% were not offering any concessions on rent when LivingPath recently pulled that data. This comes at a time when steep discounting is being observed across the industry, as providers seek to rebuild occupancy. The fact that fewer high-end communities were offering concessions suggests that occupancy has held up, and that residents are moving into the newest buildings at an acceptable pace.

A few providers that serve high-end clientele have confirmed this is the case:

• The Village of Southampton opened in 2020; 60% of its independent living units had filled by April 2021

• Inspir Carnegie Hill opened in March 2021; deposits were in on 90 of 215 units as of late March, with stabilized occupancy projected within 18-24 months

• Aegis Living is seeing “unprecedented” preleasing on assisted living and memory care communities under development

Behind the numbers

There are various factors that help explain the strong demand for high-end senior living communities.

For instance, luxury home sales are “soaring,” USA TODAY reported this week; among older adults who are taking advantage of the strong market to sell, some may be transitioning to senior living communities.

Furthermore, some high-end communities serve a needs-based clientele, and move-ins among this group remained steadier during the pandemic and have come back more quickly — a trend observed earlier this year by Patricia Will, CEO of Belmont Village, a provider with three communities on the LivingPath list.

But high-end senior living communities are not just benefiting from larger economic forces and needs-based demand. They are also winning over new residents by offering appealing products and drawing lifestyle-focused residents whose values and priorities shifted during the pandemic. Now, they are more drawn toward the socialization offered by communal living.

“It’s a new kind of demand that has been brought to light because of Covid,” Brandywine Living CEO Brenda Bacon said recently during an SHN+ TALKS. Brandywine Living at Livingston appears on the LivingPath list.

New models emerge

Meeting this new kind of demand requires new approaches to senior living, and several providers on the priciest communities list are driving trends such as university partnerships; a more elevated approach to wellness; and new pricing models:

• Collegeville: Nexus Insights President and NIC Founder Bob Kramer recently predicted “an explosion of different lifestyle and setting options” for older adults, including one he dubbed “Collegeville.” These are communities focused on lifelong learning. Several high-end providers are going down this path. Belmont Village Westwood is located near UCLA, and the provider also has partnerships with USC, UC-Berkeley, Vanderbilt and other schools. Meanwhile, Watermark just redeveloped a former UCLA dormitory and opened it as The Watermark at Westwood Village.

• Wellnessville: Kramer predicted another “huge segment” will be “Wellnessvilles.” As the name implies, these are communities that support more vibrant living through a focus on health and wellness. Watermark also is on the leading edge of this trend, pursuing a “precision wellness” model with the help of Aras Erekul, a former leader with wellness pioneer Canyon Ranch. Watermark intends to harness technology to create more personalized approaches to whole-person wellness.

• Membership models: In addition to charging high monthly rates, new residents at Watermark’s luxury communities pay a one-time “membership fee” that can range from $30,000 to $50,000. This might seem steep, but these fees are lower than six-figure entrance fees that are common at continuing care retirement communities (CCRCs). The fees support CCRC-like amenities and services but with more unbundled, a la carte pricing that supports more individualized lifestyles — and consumers have not hesitated to pay these fees, Freshwater explained in 2018. Other providers are also implementing some version of membership fee models; Belmont Village Westwood has a $45,000 move-in fee, according to LivingPath. And Isakson Living’s Peachtree Hills Place — in the affluent Atlanta suburb of Buckhead — also offers “membership” rather than a typical entrance fee.

University partnerships, wellness models and new payment approaches focused on a la carte options are not limited to high-end communities. But these approaches might have to be adapted for senior living at lower price points.

For instance, real estate near major university campuses tends to be pricey, particularly in urban markets. But a mid-market senior living community might create a “Collegeville” experience in different ways, including through creating suite-like living arrangements with shared common spaces — an approach most recently suggested to me by Scott Likins, principal with architecture firm BLDD. In addition, older adults may be more inclined to participate in distance learning programs, given that Covid-19 increased their familiarity with online communication.

And membership models might not have to come with potential sticker shock related to upfront fees. Leaders with Formation Capital and senior living provider Generations are raising a fund to create senior living communities that would have much more affordable membership options, which would provide a way for residents and members of the general public to utilize amenities. Some of these offerings would be reimbursed through members’ Medicare Advantage plans, in this model.

In any case, the demand for high-end communities that exemplify these trends should provide optimism for the industry, as a sign that innovations are resonating with future consumers. It’s possible that senior living is beginning to change the paradigm, to no longer be what former Welltower CEO Tom DeRosa described as a luxury product that no one wants.