The Future of Senior Living is Now – and Why Our Team is Ready for It

Like numerous sectors across the real estate market, conditions for senior living development have faced challenges due to the economic climate. Yet despite these capital market and industry hurdles, our senior living development team continues to secure success, delivering an impressive eight projects this past year.

According to data from the National Investment Center for Seniors Housing & Care (NIC), our team—in collaboration with our various partners—is responsible for a significant 27 percent of new construction starts between 2020-2022 in metro areas, which equates to 2,211 units out of 8,015 total units across the industry.  

These successes—amidst the changing capital markets during 2020-2022 — are a result of our unwavering commitment to the senior living space. Harnessing our expertise to overcome the economic headwinds, we do our due diligence through strategic thinking, intentionality, patience and continuous monitoring of the market.

Read on for insight on why our team of experts see a bright future for senior living and how we are continuing to position ourselves for success as we look ahead to 2024.

Why We Believe Senior Living is Still a Good Investment, Despite Current Economic Conditions

The data doesn’t lie

One of the many reasons we believe in cementing our stake in the ground within the senior living space is the data that points towards promise, growth and momentum.

The financial performance of senior living has shown greater resilience in recent economic cycles compared to almost all other real estate sectors. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), the senior living sector’s annual returns through 2019 exceeded all other real estate sectors’ returns on a long term basis. The 10-year total returns for senior housing in 2023 is the second highest (following industrial), according to the NCREIF National Property Index (NPI).

Along with promising financials, the senior living industry offers encouraging industry perspectives. According to the American Senior Housing Association (ASHA), consumer sentiment has grown more positive, especially for independent living prospective residents. Another survey, conducted by ProMatura Group—an Oxford, Mississippi-based senior living market research firm—also confirmed that prospective residents and their families continue to have a desire to utilize senior living services in the future.

There’s a need for senior living communities

Backed by our senior living and capital markets teams’ market research, we believe the senior living industry will become even stronger over the next 10 years. The demand for senior living communities will continue to grow through this decade and then accelerate rapidly over the next 20 years due to the aging of the Baby Boomer generation. With the first baby boomers turning 78 next year, the generation is officially of age for seniors housing. The front edge of the silver tsunami wave is here.

The eight projects we developed with our partners in 2020-2022 are opening with higher than proforma rents and in most cases increased preleasing and initial move-ins. According to the NIC MAP® Data Service, the pace of growth in all rates year-over-year for all care segments have maintained near record highs since the onset of 2023. In comparing data measuring senior housing in primary and secondary markets between the end of 2020 to the end of 2022, occupancy growth rate has increased over 4 percent, while rent growth has increased 9.69 percent and occupied units have grown 7.79 percent.

Along with the increasing demand, the need for updated senior living communities is more present than ever. Many older senior living communities were built without the ability to update technology, health, safety, or mobility. Life expectancies have also been increasing, acuity levels have been rising and the wellness and healthcare needs of seniors will need to be satisfied outside of traditional healthcare settings, with senior living expected to play an increasingly important role.

We’ve been waiting for the growth in senior living population for decades. With developments taking an average of 18-24 months to complete, the time is now to move forward with new developments to best meet the growing industry need.

How We Ensure Total Project Success

Creative solutions, consistent returns  

Our team’s success stories across senior living are not restricted to this past year—we have established a consistent reputation of navigating the ebbs and flows of economic headwinds. We started in this business over 10 years ago; today, our developed and built portfolio includes 35 senior living communities and 6,395 units. We have successfully sold several communities in our portfolio. Our team has also successfully worked with numerous sponsors to construct senior living communities across the country.

During the COVID-19 pandemic, occupancy levels and revenue were down in our senior living communities; however, we were able to make up for it through net operating income—maintaining a healthy position throughout our owned developments. Our portfolio, thanks to our operating partners, experienced above average industry recovery of occupancy during 2021 and 2022.

Depth and breadth of experience and knowledge

Over the last 10 years, we have proven ourselves a worthy steward of institutional and private investor capital in the senior living space. Our depth and breadth of experience—from development and design to construction and capital markets and asset management—allows us to move faster and smarter, getting projects to market before your competitors without compromising brand consistency across multiple operators.

We also offer a holistic approach to senior living—from conception to completion and beyond—as a national developer, architect + engineer, builder, asset manager and capital investment consultant. Offering these services inhouse offers a single point of contact, ensures accountability, enables economies of scale and allows alignment of partnership interests.

Strategic and careful site selection

Our team is strategic and patient with the projects we move forward with—we don’t just do deals to do deals, but rather, we secure the right deals in advantageous locations. Our site selection process is diligent and thorough to best predict success.

Other factors we consider for site selection include:

• Proximity to services
• Visibility and high-volume traffic counts (Is it visible from the highway?)
• Quality of surrounding development
• Good quality residential neighborhoods and perception of safety
• Occupancy rates in market
• Construction costs

According to our leadership team, we are committed to doing the right projects, the smart projects and meeting the return threshold.

While there are challenges in the short-term economy, we know it is valuable to continue moving forward in the senior living space to create places where people can thrive and establish solid investment opportunities.

And we aren’t alone. Developers, operators, equity groups, lenders and senior living industry organizations all believe that senior living is experiencing a near term bump in the road and the long-term outlook for the industry remains positive.

As we continue forward, we will remain diligent at pursuing the right projects in 2024 and prepare to have deals ready to go when capital is ready to invest in the senior living space, continuing to develop and deliver the best senior living communities across the country with our operating partners.