From headwinds in construction to the cost of capital, senior living operators face many hurdles to growing their footprint in 2023.
The most traditional way to grow is simply to scale through adding new communities. But that is not the only way — through creative design, senior living companies can also grow their individual campuses to generate new revenue with possibly less risk.
In 2023, senior living operators are embracing design concepts that creatively add to a community’s overall unit total with new freestanding units. The concept has different names depending on who one talks to. For RLPS Architects, for example, they are “Hybrid Homes,” and for Perkins Eastman, they are “hybrids” and also “villas.”
But both terms describe a practice of adding cottages or cottage-like units to a senior living community — and both could be the way of the future for senior living companies looking to add scale and in turn improve revenue while not committing outright to a massive, prototypical development.
“With the cost of money, the increased cost to build and the cost of labor … these hybrid homes become attractive,” Perkins Eastman Principal Joe Hassel told Senior Housing News. “You’re not building care levels, you’re not building full kitchens, in terms of big restaurant venues.”
‘Hybrid of a hybrid’
Lancaster, Pennsylvania-based RLPS is so bullish on its hybrid senior living model that it trademarked “Hybrid Homes.” RLPS Managing Partner Michael Martin told Senior Housing News that the design firm is well underway with various hybrid projects.
“Right now across the country, most of our work is pursuing these and being asked to do hybrid homes on campuses,” said “Communities are looking to do infill projects without stretching their financial abilities.”
RLPS has as of present completed hybrid-focused projects in Florida, North Carolina, Virginia and South Carolina, with other projects underway in Arizona and across the Midwest.
No two hybrid senior living communities are alike, with each community putting its own spin on the proper layout, the right unit mix and architectural style with appropriate scaling. The development type allows operators to add independent living units to attract residents who are lower on the acuity spectrum, and potentially on the younger side.
Hybrid builds are typically smaller unit mixes, ranging anywhere between five to 50 units. These projects require less in financing, making access to capital more attainable for smaller operators. That in turn eliminates the uncertainty that could bog down a large-scale senior living development as capital partners typically require a high ratio of pre-sale figures before underwriting a project, Martin said.
“We’re seeing nearly every community in every region looking for a different sort of design aesthetic,” Martin added. “We’re seeing it all over the country and from a housing standpoint, it’s the way people are going.”
In early 2021, RLPS was tapped by The Highlands at Wyomissing, a life plan community in Wyomissing, Pennsylvania, to bring its hybrid approach to the community — and take it to a new level.
“We were tasked with the idea of how to develop something that incorporates the best qualities of cottage living and those of apartment living into something that could easily be marketed and sold,” Martin said. “At 41 units, it’s essentially a hybrid of a hybrid. which is two hybrid homes combined.”
Designers with RLPS worked to develop more connected social spaces, which Martin said is not typical to cottage senior living; and built units around those shared areas. Natural light and adding windows are also key components, while removing the absence of long connecting corridors erase the typical feel of apartment-style senior living.
The Highlands at Wyomissing CEO Kevin DeAcosta said the project was a direct result of the sharp demand for senior living seen in the Berks County area.
“We wanted to make sure that we were expanding at the right size in the right way,” DeAcosta said. “It was about positioning the organization in the right way so that we have the right inventory to successfully market to attract every cohort of the population.”
With six floor plans, The Vistas at Fox Hill project looks to pair space and privacy in the midst of creating a social space where residents can gather and feel socially connected. That’s all mixed in with resort-style amenities, and when the time comes, residents have access to higher levels of care through the Highlands’ Life Care program.
By taking a hybrid approach, DeAcosta said The Highlands was able to finance the project with greater access to capital that might be harder to secure for a larger project. With interest rates high and the cost of debt elevated, operators must find new ways to tackle their growth plans.
Even around construction, design teams were able to minimize infrastructure costs by combining the two buildings, not having to duplicate the number of elevators or other infrastructure components.
“It helps be efficient from a construction standpoint,” Martin said. “This is really a unique design that we have not done elsewhere and I think you’re going to see more of this.”
From cost efficiency to readily available capital, Martin believes the fruition of hybrid senior living communities will only continue to grow, with hybrid projects moving to construction more quickly while having fewer units to pre-sell to show value to a prospective capital partner.
With expenses and staffing preventing some operators from starting larger projects, the hybrid model could be a new way of not only expanding a physical footprint, but also a community’s bottom line, he added.
Hybrid projects are brought to construction more quickly than larger projects which in turn leads to the community’s revenue stream growing much quicker, Martin said.
“There are some of our clients who tell us that [hybrid communities] are the fastest-selling products they have ever had in their communities,” Martin said.
DeAcosta said the additional 41 units will add key revenue to The Highlands’ bottom line, while positioning the organization to take advantage of the strong demand tailwinds pushing senior living optimism forward.
“For us, it’s just good business to make sure you’re identifying your target market and positioning yourself in a way to take advantage of that target market as much as possible,” DeAcosta said.
That rosy picture of future revenue comes as DeAcosta said The Highlands’ IL occupancy remained in the mid-90th percentile, with a goal of returning to 95% occupancy this year.
With the Vista at Fox Hills project generating positive chatter in the local market, DeAcosta said the addition will help the entire campus, generating new conversations and attracting prospective residents. The Vista at Fox Hills is expected to open next year.
‘Strong financial gain for the long-term’
From a wider industry perspective, Perkins Eastman Principal Joe Hassel said the beauty of the so-called hybrid model and others like it come from its ability to attract a younger, more active senior living resident.
“So understanding the market in terms of the depth of the market and what the expectation is that the consumer becomes really important,” Hassel said. “The genesis of the hybrid model is all about how we get a person moving in sooner.”
With regard to the hybrid model flourishing, Hassel said he expects these kinds of hybrid models to become “more common” in the years ahead as demographics shift nationwide.
Hassel highlighted two recent Perkins Eastman projects as exemplifying the trend: one at Southminster, a life plan community in Charlotte, North Carolina; and another at The St. Regis Residences in Rye, New York.
At Southminster, Perkins Eastman looked to facilitate its design in a way that integrated residents across all care levels. That meant repositioning MC and SNF care for the next generation of senior living customers, while repositioning units to be more efficient in terms of stair counts and other infrastructure efficiencies.
Hassel said the additional units will help CCRC operators gain revenue through simply having more entry fees.
“It really creates a strong financial gain for them long-term,” Hassel added.
At The St. Regis Residences, the design firm helped design the active adult community. The project steered away from typical single-family units and is geared more towards cottages across a cluster of buildings that are situated around outdoor, hospitality-driven spaces.
“In looking at how do you redefine the unit layout, we introduced things like a micro-entertainment center or a bar area within the kitchen over a traditional kitchen that creates an experience or what that residents lifestyle may be.”