Members of ULI’s Senior Housing Council discuss the health of the seniors’ housing industry, how providers are working to attract residents, the impact of the Affordable Care Act, and other trends.
How is the senior living industry faring?
Matthew Phillips: Since the economy has improved, seniors’ housing—especially rental properties—has performed well. In our portfolio, we’ve seen increased occupancies and some good rate increases. In the underwriting we’re doing, our assumption is that, while there is more supply coming online over the next three or four years, we’re looking at 2 to 3 percent rate increases in stabilized properties.
Margaret Wylde: It’s coming back well, almost to where it was before the recession. The active-adult communities that I know of are selling well, and new ones are in the pipeline. The independent living, assisted living, and memory care sectors also are doing quite well. The occupancy numbers are almost where they were before the recession, except for the markets where new product has been recently introduced. Because the seniors’ housing sector performed well during the recession compared with other sectors, many new investors are coming into this market area. I don’t think I’ve ever seen so many investors as we are [seeing] now.
W. Aaron Conley: Occupancy rates are strong throughout many of the levels of care, from independent living through assisted living. The seniors’ housing sector has had returns that have surpassed the one-, five-, and eight-year bases of the apartment, retail, industrial, and office sectors, according to the National Council of Real Estate Investment Fiduciaries Property Index. The surge in the number of people about to turn 80—which will continue for the next 20 or 30 years—is very promising for the industry. Of course, the average age of entry, especially for independent-living communities, is going up because people are still delaying their decision to move. But the increase in the numbers within this demographic will sustain the business over time.
What strategies are providers using to compete for residents?
Jerry McDevitt: Integrating seniors into the surrounding community is an important trend that is gaining momentum. Locating communities in transit-oriented districts and walkable environments allows seniors to get around more easily and interact with people of all generations. These newer models of senior living provide options beyond the suburban independent- and assisted-living communities and the larger continuing care retirement communities [CCRCs]. Seniors are opting to move into urban neighborhoods, close to shops, restaurants, libraries, and theaters. The large, gated, age-restricted active senior housing communities that often didn’t allow children are becoming a thing of the past in some regions of the country.
Sharon Grambow: We’re seeing the tail end of the silent generation enter senior housing communities, and they’re acting much like the baby boomers in that they want a lot of the newer technologies and more space. So we’re introducing products that are comparable to active-adult communities. Our newest community is spread out over 40 acres [16 ha], consisting mostly of detached homes, unlike a conventional congregate-living building. We’re adding amenities like pickleball courts, resistance pools, spas, and outdoor yoga and meditation areas. This generation is really focused on wellness.
Phillips: We’re focused on activity spaces. In our new projects, we’re adding cyber cafés and dedicating more space to therapy and wellness. With the units themselves, more efficient units are becoming common, borrowing strategies from market-rate housing. We’re also offering multiple dining venues to keep things fresh, because if people are having the bulk of their meals in the same place, they want variety. Great dining experiences are really important, so on the service side of the equation, we focus a lot of time on staff training and culinary training.
Wylde: A lot of providers are upgrading dining areas, replacing one large dining area with two or three, or creating alternative dining areas, such as a bistro and a café to supplement the main dining area. Many more communities are adding bars or lounges and getting a liquor license. We recently conducted a study and found that those who live in a community with a bar or lounge are happier than those who don’t. So it makes a difference.
Conley: We’re seeing a lot more renovations, especially of older products. Before the recession, the size of units was increasing, especially in independent living. The thought process was that people were downsizing from 2,500- to 3,000-square-foot [230 to 280 sq m] homes to apartments, so the apartment sizes should come as close as possible to the square footage of those homes. But post-recession, units are a lot smaller, with more compact, more efficient footprints.
How is the design of individual residential units changing?
Wylde: Today’s units look much more like a nice modern apartment than they used to. Some communities, like Sagewood in Phoenix, even offer loft-style apartments as one of the options. It’s a refreshing change. New units also tend to have higher ceilings and a more spacious feel than the old-style units. Even in assisted-living facilities, people spend most of their time living, not being cared for. So they want a great residential environment where they feel they’re living a better life than they would be if they were home alone.
Grambow: Many years ago, some senior housing communities were built with 400- and 500-square-foot [37 to 46 sq m] studio apartments and 700-square-foot [65 sq m] one-bedroom units, but those aren’t attractive to the current generation of prospective residents. They want larger spaces, higher-end finishes, tile or wood flooring, granite counters, and stainless-steel appliances. People also want the ability to personalize their space, make a room into a sewing room or a library or an office.
McDevitt: The assisted-living and skilled-nursing facilities of the 1970s and 1980s were often of poor quality with an institutional feel, which gave this industry a black eye. Most of those are being renovated or repositioned now, because today’s seniors and their adult children often prefer a more contemporary feel, influenced by hospitality design. The single large dining room with fixed meal times has evolved into multiple restaurant/café-like dining options with flexible menu choices and extended dining hours. A strong indoor/outdoor connection is considered important, where residents are able to relax, enjoy the gardens, or dine outside.
How is the Affordable Care Act affecting the industry?
Phillips: It’s causing us to partner with other entities in the health care sector. Of course, we’ve always wanted hospitals to refer patients to our skilled-nursing and rehab facilities. But now we’re solidifying those relationships. And the Affordable Care Act has incentivized health care providers to seek relationships with senior housing providers.
Grambow: In the past, hospitals looked at skilled-nursing centers as places to send patients after discharge, but they weren’t focused on subsequent patient outcomes. Now, with the Affordable Care Act, hospitals are penalized for readmissions, so they want patients to get the best care. So we have been repositioning skilled-nursing health centers on our campuses. For example, we are currently repositioning one that has 179 skilled-nursing beds by taking 100 beds out of service. We’ll end up with about 75 private rooms for short-term rehab or long-term care, with a high-end-hotel feel. We’ll turn the rest of that space into assisted-living and memory care apartments.
What innovative models of senior living are you seeing?
Grambow: High-rise senior housing campuses are being built in downtown locations close to arts and cultural offerings or universities. There is also more niche senior housing, such as communities targeting retired members of the military, or alumni of a particular university, or a specific ethnic group. People like to be around others with similar affinities, and they can structure activities and life-enrichment experiences related to those specialized groups.
Conley: Seniors want to live in a vibrant, walkable place that has opportunities for intergenerational activities. The conventional wisdom is that the amenity mix needs to be closed and age-restricted, but that’s not necessarily the case, especially if you’re trying to create a more vibrant, intergenerational setting. The more innovative senior housing developers are trying to create connectivity between residents and the at-large community in as organic a manner as possible, because that’s key to authenticity. For example, Merrill Gardens/Corydon Apartments in Seattle has independent and assisted-living senior apartments on the same block as market-rate apartments, sharing amenities.
McDevitt: One innovative approach that’s becoming more common for assisted-living, memory care, and skilled-nursing communities is to organize residents into smaller households or neighborhoods of 12 to 20 residents around homelike amenity and support spaces, either within a multistory building or in individual single-story buildings. Each household typically has a minimum of two caregivers, its own living and amenity spaces, and a prep and serving kitchen close to dining tables for the residents to have meals together family style. Cooking is typically done in a central kitchen and prepared food is brought to each household via warmers.
This newer model is gaining acceptance and has demonstrated success when compared with the older independent-living/congregate care–like multistory buildings with dining and living areas and other support spaces consolidated on the first floor, because it’s difficult for residents needing additional care to have to walk and then take an elevator from their room to reach the main floor. They often won’t leave their room on their own and require additional assistance. Creating personalized households is more comfortable for these residents because they can usually see their familiar caregivers and amenities and activities from their room, and the walk is short.
What other trends are picking up momentum?
Conley: There will continue to be a growing need for caregivers. People feel that they will be able to age in place in their home, but the ratio of potential caregivers to people 80 and over who require medical support is seven to one, and that’s expected to shrink to four to one by 2030. So will there be enough people to provide in-home care, or will more people have to move into a community? I also think the industry needs to look at affordability, and not necessarily just for low-income households. Considering what has happened with 401(k)s and pension funds, we’ve got to take a hard look at the value proposition our industry is offering residents. People don’t want to pay $3,000 a month for services they may not use.
Phillips: Development of independent-living communities is going to make a comeback. For about three or four years after the recession began, there was very little senior housing development to speak of in any category. A couple of years ago, development started happening, but mostly in the assisted-living and memory care categories. That was because prospective residents had been simply delaying the decision to move into seniors’ housing as long as they could, so by the time they were ready to move in, their health care needs had increased. That tendency helped drive some of the development in the assisted-living and memory care sector. Now that we’ve had two years of [development of] assisted-living and memory care communities, I think the next phase will be independent living.
Wylde: We see CCRC development picking up. During the depths of the recession, some said that CCRCs were dead, but consumers like the idea of having access to a continuum of care on the same campus. I think CCRCs dropped more during the recession because a greater proportion of households who move to CCRCs own their own home—about 75 to 77 percent of those who move to the combined or freestanding independent-living communities own their homes at the time they make their decision, while more than 92 percent of the people who move to CCRCs do. So it stands to reason that CCRCs didn’t fare as well during the recession because people were unwilling to take a hit on what they perceived the value of their home to be.
Grambow: More people want the security and peace of mind that CCRCs offer, but they want to stay in their own home as they age. One trend that’s picking up momentum is life care at home, otherwise known as CCRCs without walls. This model allows people to stay in their homes while having some of the benefits of living in a CCRC. Here in Arizona, legislation was recently passed that allows us to provide that product. We’re going to be rolling out that offering later this year.
Ron Nyren is a freelance architecture and urban planning writer based in the San Francisco Bay area.
