Senior Living Developers Bide Their Time as Starting New Projects Remains Tough

Senior living developers are awaiting changes in the capital markets before starting new builds as new construction starts potentially bottom out in the coming months.

Some developers are spending their time in other industries, such as multifamily, or have slowed down to prepare to start work as soon as the capital markets begin to shift.

For some companies, such as Ryan Companies, the past 12 months have proven more difficult than in the past. At the Minneapolis, Minnesota-based company’s highest point in 2021, it had moved forward on eight projects, according to Ryan Cos. Executive Vice President of Senior Living Julie Ferguson.


“Last year, we started in one, and that was really a function of the capital markets really not being focused and investing in new developments,” Ferguson told Senior Housing News.

Developers bide their time

Senior living developers have largely been biding their time in the last year as market conditions have remained tough.

One problem is that financing for new projects is still hard to come by. Interest rates are still not going down in 2024 – and in fact, there are fears further hikes could be on the way. Those conditions have made it tough for senior living stakeholders to pencil out the math required to start building.


The most recent lending data from NIC showed that new senior living construction loan closings “subdued to weak levels and hit a new low” in the third quarter of 2023, with conditions carrying over into the current year.

As a result, construction still has not picked back up in 2024, with recent NIC data showing that the industry is seeing the “lowest rate of senior housing construction since 2010.”

According to an April 4 press release from NIC, new construction starts are sitting at 1.37% of total inventory, though the total number of projects saw a slight uptick from the fourth quarter of 2023, with the cost of capital and current lending conditions being the two noted factors leading to the low amount.

With construction still tough to achieve, developers have made preparations now to be ready when the market does eventually turn and more new construction projects get off the ground..

Dallas, Texas-based Silverstone Senior Living has kept busy maintaining its real estate connections in order to keep projects ready to go, according to COO Tami Cumings. The company has been able to meet its goal of developing two projects per year, and that is largely due to strong relationships with lenders and equity partners. 

However, Cumings added this is the lowest she has seen construction starts during her tenure within the senior housing industry.

Scottsdale, Arizona-based Alliance Residential is currently focusing its attention on an 11 asset pipeline, nine of which are now open and in lease up, according to Marco Vakili, the company’s managing director of northern California.

“We are investing significant bandwidth, in collaboration with our operators, into the tactics and strategies of getting these buildings leased up and stabilized,” Vakili told SHN.

Alliance is reviewing its internal processes in search of efficiency and cost savings, utilizing the data it has gathered from being a large developer and apartment builder, Vakili said. Additionally, the company is using the slower time to strategically plan for the future and question current approaches and make changes as necessary.

Alliance has spent its time tweaking some of the brands it has in other real estate sectors. For example, the company has focused more of its attention on its Prose workforce housing brand, which is “a very livable and affordable product.” As of the third quarter 2023, the Prose brand was bringing in 60% of Alliance’s $4 billion pipeline, Vakili said.

Looking into the future, Alliance believes it will continue to tweak its various offerings, including in senior living. For example, Vakili said the rates needed to sustain the development costs of high-end projects will price out middle-income residents entirely. But that is a large and growing demographic numbering millions of older adults.

“There are only so many high-end markets that support the current model which means the restart may be slow,” Vakili said. “However, a modified model of a more modest, need-based, high acuity community may further open the gates and create a more robust return of starts.”

Preparing to move ahead

As was the case in 2023, senior living developers are focused on getting their house in order to move quickly once more volatile market conditions settle.

Ryan Companies has four projects in its pipeline ready to go once market conditions shift, according to Ferguson. The company also develops multifamily, healthcare and industrial properties, allowing it “far more patience” than other developers, given it can subsist on other revenue.

“We’ve got the other asset types that are favored, so it’s keeping everyone in the company very busy in the meantime,” Ferguson said. “We can shift our focus as we need to as a company, and for us it’s important when capital comes back that we’re ready and we’ve got some deals so we can be the first ones in the ground.”

While Ryan Companies has four senior living projects lined up and ready to go at this time, they won’t make up for the hundreds of thousands of units that need to be built to meet the incoming demands from the baby boomer generation, Ferguson said. Even if the markets change in the near future, it takes an estimated 18 to 24 months to begin getting a site ready for construction.

“Unless you have groups that have invested the pre-development capital … it’s going to take a while for people to kick back into that and really get that process and that flow started as it was between 2016 and 2020, where there was a rhythm,” Ferguson said.

The need for new sources of capital is why Ryan Companies is focusing on outreach to smaller, regional equity groups that historically don’t have a presence in the senior living industry.

“We think the more options we have as a developer, from a capital perspective, the better off we are, and the better off the industry is,” Ferguson said.

Companies featured in this article:

, ,