Senior Living Cottage Expansions Gain Appeal As Development Remains Tough

As senior living development remains tough, some companies are finding ways to build scale and evolve for a new generation by adding cottages to their campuses.

Operators with cottage units say they can serve as a stepping stone for prospects entering senior living for the first time, while also helping hit a price point more amenable to the baby boomers.

Cottages also serve as a way for operators to grow without taking on redevelopment costs, due to their often small and the standalone nature. They can often be plugged into a community’s footprint on existing vacant land on site or can be added as a standalone community offering independent living.

“Cottages have come back, because you’ve got a new generation who are looking for something that’s easy to transition into but they still have enough mobility that they have that independence,” said Lantz-Boggio Architects and Interior Designers Partner Bill Foster.

From the affordability of both the development and end cost to residents, the cottage asset type could further grow in popularity in the coming years as operators look to lower overall senior living costs and capitalize on demographic demand.

In the last three years, operators including SilverPoint Senior Living, Distinctive Living, Commonwealth Senior Living and the Davis Community have expanded their portfolios with cottage units with plans for additional growth through this customizable and flexible unit type.

Amenities and scalability drive cottages’ popularity

Senior living cottages often provide more space than a typical residence in terms of square footage, offering in many cases a garage and back and front yards. Residents also typically have access to a larger community’s amenities and health care services when needed. A sense of independence and safety are key marketing factors used by operators when attracting new residents to enter senior living.

“The transition is that a lot of your life becomes easier but at the same time you get to hold onto the garage or gardening and things you were accustomed to at home,” Foster said.

Lantz-Boggio worked closely with The Davis Community in Wilmington, North Carolina to add cottages in a duplex style that added increased density to the available land the community had in building out new units.

The community’s first cottages opened in January 2021 and now there are 32 cottages in a duplex style with two floor plans ranging between 1,600 square-feet and 1,800 square-feet. They also are more affordable with more space than a two-bedroom unit at the original community location.

The Davis Community Executive Director Marsha Taylor told SHN the community added cottages to help capitalize on market-driven demand for independent senior living options and to also recognize the founder’s vision to bring homes or cottage-style offerings to life at the property. Typical residents joining the community’s cottages are transitioning from larger homes of 3,500 square-feet or more down to 1,800 square-feet as part of the transition into senior living.

“They enjoy a freer lifestyle to go and do what they want to do rather than have to take care of things like maintenance,” Taylor said. “This is a great introduction into independent living. It gives them flexibility to test if they like it and it’s about enjoying the lifestyle that they can create.”

In the future, Taylor said she believes that cottages will become more popular as baby boomers continue to flow into senior living communities and demographic shifts continue.

Affordability, lower cost basis make cottages attractive

Senior living providers have started to take affordability in senior living more seriously in the wake of the Covid-19 pandemic, but there’s still a wide margin between high-end luxury senior living and affordable senior housing, leaving many Americans unsure of the road ahead and face an “urgent need” for more affordable options.

At the same time, operators are facing their own affordability crunch, not in the cost of renting their units, but in the cost to add new ones to their campus. Cottages, given their smaller footprint relative to congregate senior living, can be an attractive way to build scale without breaking the bank or scaring off potential financial partners.

SilverPoint Senior Living is undertaking two phases of cottage development, according to CEO Shawn Corzine. That was fueled due to development pauses in 2020, he added.

“They lease up well,” Corzine added. “The construction cost is your basis and you can never change that so we’d rather work harder right now and figure out these creative solutions.”

The lower cost to develop cottages fueled the new growth and the units “filled up almost immediately,” Corzine said. The later phase will bring total cottage units up to 58 for SilverPoint with 50% of those units pre-sold.

“We’ve seen really good demand for it,” Corzine said. “Cottages provide an additional step for seniors to move their way into the higher levels of care within senior living.”

That gets over what Corzine termed as “culture shock” tied with moving into traditional senior living for most residents, and cottages can soften that transition. SilverPoint’s capital partner, Journey Capital, is also bullish on the unit type. With cottages being a small portion of the cost of a typical senior living community development, they can provide a way for operators to secure needed financing in a challenging interest rate environment.

“We used that to parlay into our financing and show that to the banks that there’s a hypothesis about this project in this market and by the way, here’s our backing behind why this project will be successful,” said Journey Capital Partner Anand Patel. “I think our next few projects are going to be cottages, potentially just standalone, too.”

In today’s economic climate, Patel said capital partners like Journey Capital would consider cottage unit type development in the future due to the high cost of doing traditional assisted living and memory care due to operational costs down the road.

“If you do an entire campus project versus an all-cottages project, the risk is just lower,” Patel said. “The other benefit is you can phase it out where you can break ground in segments.”

Distinctive Living, based in Freehold, New Jersey, is in the midst of planning three standalone cottage developments, with two sites recently receiving necessary approvals and a third site under a letter of intent, according to CEO Joe Jedlowski.

“We’re creating a new line as part of our development pipeline,” Jedlowski said. “We are creating what’s called pocket neighborhood cottages.”

The projects will range between 110 and 120 cottage units and be prefabricated units with modular construction that will reduce construction costs, reduce construction build time and, most importantly Jedlowski said, offer affordable prices for residents. The cottages will range between studio, one and two-bedroom layouts with garage access, walking paths and a gazebo community space.

“We’re trying to meet the middle market,” Jedlowski said. “It allows us to construct quickly and it gives us the ability to open the neighborhood and lease it as we’re developing on that site.”

Distinctive Living plans to pair its homecare agency within the cottage neighborhoods to offer a light element of care for residents, Jedlowski said. Distinctive Living operates over 27 senior living communities as third-party managers along with north of a dozen communities in its development pipeline at varying stages.

“We’re creating that social model, but at an affordable price,” Jedlowski said. “Adding the homecare component is like our secret sauce and it seems to be a very lucrative return model as well.”

Commonwealth Senior Living, based in Charlottesville, Virginia, has an established cottage footprint at some of its existing communities, with more development of cottage units in the works, according to Commonwealth Senior Living Senior Vice President of Sales & Marketing Kristy Ruppe Craddock. Commonwealth Senior Living owns and operates 38 communities. 

With 32 cottages currently across two campuses, Commonwealth Senior Living will add 11 more cottages in the future, Ruppe Craddock said. Those additional cottage units are expected to come online this July. 

“We’ve been exploring the concept in additional communities,” Ruppe Craddock said. “I think the main philosophy of any opportunity for Commonwealth whether it’s an acquisition or an expansion is we look for opportunities where we can add value in the cities where these communities exist.”