Aging Inventory in a Changing Market
Within many markets in the United States, the present Senior Housing inventory has aged to the point of being obsolete. Opportunities abound to challenge those older properties with new developments.
The Value of Wellness
A new focus on wellness has changed the Senior Housing landscape as well. The old idea of building a place that serves the basic needs of seniors – and little else– has been outmoded in favor of providing healthy living, a sense of independence and a community to connect with. Baby Boomers do not just want a place to live, they want a place that provides something they cannot get by staying at home.
What Was the Goal of the Old Model?
Older Senior Housing tends to come in two varieties. First model: focus on providing what the home of a senior would, with the added benefit of amenities like laundry service and help with “Activities of Daily Living” (ADLs) such as bathing, eating and the like, as needed. The units serve, functionally, as apartments with assistance, or often simply as age-restricted housing.
The second model has crafted the popular image of what Senior Housing is: Often called “Skilled Nursing,” this model serves seniors with very impactful needs, such that they can’t actively care for themselves. This environment is less like a residence and far more akin to a hospital.
One of the largest downsides to these old units, for the provider, is their very rigid nature. Newer Senior Housing is now built with change in mind. They feature modular designs that not only allow a resident to remain in their living space as they develop more physical needs, but which can also be completely converted for different care or usage. This idea is used in commons areas as well, allowing the activities and amenities provided by the residence to be malleable. The industry has begun to see the changing wants and needs of seniors with the coming of the Baby Boomer generation, so they are building not just to accommodate the newest residents, but the residents after them.
Want Versus Need
New product focuses on seniors’ wants rather than exclusively their needs. Like any other consumer, seniors have desires that can be effectively met by a savvy provider. Catering exclusively to health needs to provide a safe, but uninteresting environment, is a product that holds little interest for today’s seniors.
New Product in an Old Market
Just because new properties are being built with a more forward-looking approach does not mean that the old ones will disappear. The old supply will stick around for a while, and change will have to occur if they want to stay competitive, even in markets where competition is low. Seniors will be living longer, be more able longer, and therefore will have the means to find what they need in markets outside of the radius that Senior Housing providers have come to expect.
Many of those properties can be rehabilitated to stay competitive, but that often requires a talented developer and a savvy operator to give an old building new life. Because the style of offerings in the Senior Housing of today has such a strong hospitality component, it is not uncommon to see hotels converted into Senior Housing, usually independent living, which serves Seniors who are still completely able.
For Assisted living, which helps with ADL’s in addition to providing other care in a more personal environment than traditional nursing, converting other spaces can be trickier. That task becomes even more difficult when Memory Care is introduced into the mix, as the needs there are far more particular and specialized. Converting a space into Memory Care either requires long-term, modular planning or a significant overhaul to an existing building.
For now, Senior Housing investment is in new construction to build for the current and upcoming generation of seniors. That has led to worries of oversupply, which in some markets is a valid concern. Popular ideas about Senior Housing aren’t going to change overnight, so every senior is not suddenly going to make a move. With that in mind, a good investment is one with a fund that targets very specific markets that enable a Senior Housing property to thrive.
The Value of Research and Experience
Many Commercial Real Estate (CRE) developers have entered Senior Housing to take advantage of the opportunities within. CRE expertise is not enough: experience, a well-rounded understanding of commercial and hospitality, and a robust arm for research are what lead to successful projects in this space. It is about understanding what the market will need in the next decade and more, not just what serves what is visible at this moment. Old Senior Housing made the mistake of assuming our perception of aging would stay the same. We should, and must, think different.