3 Trends Reshaping Senior Living Development

Despite rising construction costs and delays caused by supply chain disruption, now is the time to get aggressive on senior living development pipelines.

That was the message shared by Atria Senior Living CEO John Moore and Maplewood Senior Living CEO Gregory Smith at our recent BUILD conference in Chicago.

Moore commented that it’s time to “step on the gas,” while Smith said that Maplewood and capital partner Omega Healthcare Investors (NYSE: OHI) are “go, go, go, go, go” on development.


They argued that the demographics are indisputable, and organizations with the wherewithal to build today will have a crucial advantage in a few years, when their projects open just as demand surges.

But development teams also have to be shrewd about what to build and where to build. I gleaned plenty of great insights from BUILD, including these three takeaways regarding how development will be reshaped in the years ahead:

— It will be more important to avoid “most common” development mistake


— Climate change will weigh on market selection, capital availability

— Creative redevelopments will drive innovation

Upsizing and a common development mistake

When I asked Moore to identify a common mistake that senior living developers make, he did not hesitate: Making rooms too small.

This has been an issue throughout his career in senior living, he said. Though smaller rooms are more acceptable for higher-acuity residents, he argued that development teams “at every price point” need to be more sophisticated on this issue.

“It’s understanding the trade off between getting more rooms in the box and being able to have better occupancy with a smaller number of larger rooms, and better rate and more stability,” he said.

Getting room size right — as well as an optimal mix of one- and two-bedrooms — will become even more crucial as the next generation of senior living consumers arrives.

“I think the generation that is going to want senior housing [in the future] is more used to having what they want,” Moore said.

On the face of it, Moore’s push for larger units seems to contradict another growing trend, toward small-house models.

  • Atria CEO John Moore at BUILD; by RoboToaster for Aging Media Network
    Atria CEO John Moore (click below to advance slideshow)

But really, I think the most successful small house models are not focused so much on shrinking residents’ living units, but trading off on the sheer number of “heads in beds” in order to provide more expansive common spaces that are shared by relatively few people. That was illustrated at BUILD, in a panel with Chuck Bongiovanni of Majestic Residences and HKS Architects Principal Siobhan Farvardin, who described the firm’s CC Young project in Dallas.

In other words, the puzzle to solve is the same for small-house designs and more traditional ones: How to succeed by offering a more appealing living option, even if that means having fewer revenue-generating rental units in a building.

A growing pool of data should help developers gauge consumer preferences related to room size.

A Transamerica survey earlier this year showed that downsizing is motivating only 29% of moves among retirees. In fact, as a Forbes column pointed out, more retirees are starting to upsize, after taking advantage of the hot housing market to sell at a high price.

Upsizing older adults will not be drawn to cramped senior living apartments. However, I could see them being attracted to a spacious unit in an upscale community, particularly if they’re allocating some money from their home sale for another purpose, such as buying an RV.

The spectre of climate change

Last week saw the release of a report showing that 87% of global institutional investors predict more litigation coming as a result of companies breaking ESG (environmental, social and governance) commitments.

There are several factors behind the increasing focus on ESG, with the need to address climate change among the most obvious. Institutional investors in the senior housing sector are becoming more active in ESG — and their future decisions about where to allocate capital will be increasingly tied to their ESG efforts.

That message was delivered at BUILD by Jill Brosig, who leads ESG efforts at private equity powerhouse Harrison Street, as the firm’s chief impact officer.

Chicago-based Harrison Street was a driving force behind the creation of FitWel certification for senior living buildings, and is pushing for its entire senior housing portfolio to achieve this certification.

FitWel focuses on how the built environment and operational policies can promote the health and wellbeing of residents and staff, placing a premium on elements such as air quality and access to outdoor spaces.

Tucson, Arizona-based Watermark Retirement works with Harrison Street as well as several other investor partners across the company’s portfolio of 60-plus communities. At BUILD, Watermark Chief Investment Officer Bryan Schachter confirmed that operators and developers will find their access to capital limited unless they meet the ESG expectations of institutional investors in the years ahead.

  • Atria CEO John Moore at BUILD; by RoboToaster for Aging Media Network
    SHN+ members breakfast (click below to advance slideshow)

Meeting and managing ESG expectations is not simple — it means being able to achieve FitWel standards as well as other healthy building certifications, earning environmentally-focused certifications such as LEED, and reaching other benchmarks related to sustainability (not to mention elements related to governance).

The hope and expectation is that healthy, environmentally friendly buildings will ultimately command higher valuations, Brosig and Schachter said. But even the greenest building will be in trouble if it is located in a market where climate change wreaks havoc.

This was a point made by NIC Chief Economist Beth Mace, in a conversation at a BUILD breakfast for SHN+ members. In discussing how current development trends might change in the years ahead, she cautioned that many markets currently popular with older adults, including Sunbelt and Sandbelt destinations, are also particularly vulnerable to climate change.

From coastal cities at risk of flooding to warm-weather oases at risk of extreme heat, fire and water shortages, current hotbeds of development could become too risky or costly.

“Insurance costs may become unmanageable along coast lines and in fire zones,” Mace noted in a followup email to me. “As this happens, some new urban clusters will form, while others will recede. Climate change will affect much of what we know and take for granted today.”

Redevelopments drive innovation

As the hotel industry was hammered by Covid-19 in the early days of the pandemic, some senior living industry leaders anticipated opportunities to acquire and convert shuttered hotels.

Several speakers at BUILD emphasized the difficulty in finding appropriate hotels for senior living conversions — but such opportunities do exist, and I think the groups that find and redevelop hotels will help drive innovation in the years ahead.

Westport, Connecticut-based Maplewood Senior Living is one such company. Maplewood CEO Greg Smith spoke about the extreme effort needed to find hotel conversion opportunities; most have low ceilings and other physical plant issues that are insurmountable, he said.

But Maplewood and capital partner Omega Healthcare Investors (NYSE: OHI) did succeed in finding a “gem.” They are converting the Fairfax Hotel in Washington, D.C.’s Embassy Row into a luxury community under the Inspir brand.

The Fairfax has the bones needed for senior living, including large floor plates that will accommodate attractive room sizes, Smith said.

When it opens, the Fairfax project promises to push the envelope further on luxury senior living, as has the first Inspir building, which recently opened in Manhattan. Smith is aiming to create a lifestyle brand with Inspir, with unique building designs that reflect the local market and concierge services to deliver the experiences that residents want.

Hotel redevelopment also has the potential to open new avenues for middle-market senior living. Seattle-based Merrill Gardens has made inroads into this market with its Truewood product, and Merrill Gardens President Tana Gall is considering extended-stay hotels as one acquisition target to grow the Truewood platform.

“An extended-stay hotel concept, where they’ve already got a smaller commercial kitchen, kitchenettes in the rooms or apartments — I can see that being very logical,” she said at BUILD.

Merrill Gardens President Tana Gall

Of course, the hotel industry is not the only sector to be disrupted by Covid-19, and other types of redevelopment opportunities also are driving innovation. For instance, Louisville, Colorado-based Balfour Senior Living has partnered with Welltower on the redevelopment of a former college campus in Massachusetts. (And Atria — which also is elevating urban luxury with its Coterie projects — is working on a middle-market assisted living model at a Massachusetts community that years ago was a school.)

The costs and complexities of such projects should not be underestimated. However, while I appreciate that BUILD speakers spoke cautiously about redevelopment, I come away from the event even more excited about the possibilities for old buildings to find a new life as senior housing.

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