Over the next decade, the senior demographic is expected to grow speedily. By 2030, one out of every five U.S. citizens will be of retirement age, according to the latest projections from the U.S. Census Bureau. And with the average life expectancy rising from 70 years old in 1968 to almost 70 years old in 2016, demand for senior housing is likely to continue to escalate.
Investment firm Passco Cos. has already begun preparing for the increased demand in the sector. Senior housing is among the company’s targets for both new construction and value-add plays. In an interview with Multi-Housing News, 30-year real estate veteran Carey Levy, president of Passco Cos. Development, offered his insights on the evolution of the senior housing market in the U.S.
How would you describe the senior housing market’s evolution during the past decade?
Levy: Shifts in lifestyles over the past several years have impacted the numbers, demographics and desires of current and prospective seniors housing residents. And the sector has evolved to accommodate this. Perhaps most notably, across all types of seniors housing product, the average age of residents has risen to over 80. We’re observing that many people do not consider moving into the typically 55-plus active communities until their 70s.
That said, this higher age does not mean there is a lack of demand as Americans are older than ever before. According to the National Institute on Aging Statistics, there are now approximately 35 million Americans age 65 or older and this number is anticipated to double in the next 25 years. People age 85 or older are the fastest growing segment of the country’s population and this age group is expected to rise from approximately four million people to more than 19 million by 2050.
With people living—and staying healthier and able-bodied—longer, we’ve seen an emergence of an expanded idea of what seniors housing can offer over the past recent years and for the foreseeable 10-15 years.
What can you tell us about demand in this sector?
Levy: The U.S.’ 73 million Boomers comprise a significant portion—over 30 percent—of the population. Currently, 10,000 individuals are turning 65 every day. Many of these are the people that will—for the next 10, 20, even 30 years—want to be in an environment where they have constant access to competitive amenities, including social and physical activities that will help them to live full lives.
Based on this record-high and rising consumer demand, capital demand in the seniors housing market is also incredibly strong. We believe there is significant interest in this space and that there will continue to be capital chasing new stabilized assets in this sector by REITs, family office investors and exchange buyers, for example.
How did active senior housing as a product change over the past couple of years? What kind of communities are Baby Boomers looking for nowadays?
Levy: Much like their Millennial counterparts, Boomers are increasingly adopting the philosophy of simplifying their lives, desiring up-to-date modern conveniences and pursuing experiences that promote activities, social engagement, wellness and a true sense of community. Due to this, we see a niche for active senior living communities featuring the top amenities included in any luxury multifamily development, in addition to offering ways to connect with those in similar age groups.
For example, we recently worked with Avenida Partners to deliver two 55-plus active living communities in California and Tennessee. Both properties offer shared amenities that include a bistro kitchen and dining room for private parties of a resident and their guests or family members, a wellness and fitness center, theater, yoga studio, creative arts center, outdoor kitchen, firepit and several outdoor gathering spaces.
How about assisted living and memory care facilities? How have these adjusted to residents’ needs?
Levy: The seniors housing sector has expanded and evolved based on a wide range of resident needs. Just as there are more options for seniors who are seeking an active lifestyle, there are more options and capabilities in the assisted living space as well. Facilities for those with minimal care requirements are able to now perform a wider range of services and skilled nursing homes are able to perform much of the work that used to require a hospital.
What trends do you think will define the senior housing market in the foreseeable future?
Levy: We see Baby Boomers who want to have an active opportunity to experience the next 10-plus years of their life without the mortgage, insurance, drain and cost of maintaining a home. As the large Boomer population ages, we anticipate seeing the emergence of more resort-style living that caters to the various lifestyles and interests of this group in both urban and suburban settings, giving them many competitive options.
What is your strategy for 2020?
Levy: Passco is currently evaluating several acquisition and ground-up development opportunities, especially within the resort-style hospitality senior living marketplace in areas with high demand drivers. These drivers include a high Boomer population and proximity to reputable medical facilities.
We’ve, alongside our partners, independently conducted significant market research, in addition to gathering data through various consultants and lenders on the projects we’ve worked on and we’ll continue to think about how the lifestyles of younger Boomers are going to evolve, to stay ahead of the curve.
How do you expect the senior housing market to evolve this new decade?
Levy: With people now remaining healthy and active longer than usual, they are often making the choice to live in age-restricted communities long before it might be viewed as necessary. This might be part of a move to start over or be near children and grandchildren, and other times it might simply be to downsize and enjoy a more hassle-free lifestyle. Competitive seniors housing catering to this demographic will thus become more and more prevalent, complementing the care component facilities such as assisted living.