Today’s senior living real estate market ranges from aging in place to intensively managed retirement communities.  By 2030, there will be 222 million people over 60 who will generate 51% of urban consumption growth.  What is the range of residential product types that the new senior generation demands, and how will it differ from today’s range of products?   Where are the opportunities for developers, investors, and operators in future product types, particularly in the Metro DC region?  How can developers create communities that evolve as the population ages?  At the recent ULI Washington Real Estate Trends Conference, BCT architect Janet Meyer guided a discussion with senior living experts discussing the demographical needs and trends and regional and national opportunities in building active adult and senior living communities.

The panelists expect all types of senior housing will continue to be in demand for many years to come.  However, the market will need to be nimble in shifting to the changing wants and needs of the ever growing senior population.  Products will need to adapt as affordability issues become increasingly pronounced and as demographics change.  Specialization in assisted living communities will continue to be the norm, and senior housing types and locations will be driven by the ability for seniors to have access to amenities, recreation and choice in cost levels and services.

Jaana Remes, an economist with Mckinsey, set the stage for the discussion by describing a monumental demographic shift in the average age of the global population.  She reported that the 60+ age segment will account for nearly 60% of consumption growth in Western Europe and Northeast Asia.  This age cohort will have a significant impact on all aspects of the world economy with 40% of expenditures on food & beverage, personal care, recreation, travel and housing coming from this 60+ population.

Ms. Remes is seeing a shift in how senior housing is being built and marketed.  Research is showing that more niche senior communities will be constructed dependent on the market area.  In San Francisco, for example, retirement communities are being constructed to be marketed to Asian populations.  In other areas of the country, senior communities are being marketed to those who wish to live in a community with amenities, but for which you can live in an RV.

As the population ages, research is showing that individuals are looking for communities where they can make connections, volunteer and have price options Individuals are looking for choice.

For those who cannot afford to move into an age restricted community, it is expected that there will be shift in how homeowners monetize their houses (potentially their biggest asset).  It is expected that the home asset may be the only source of income, and it is anticipated that homeowners may look to taking in renters as a means of monetization.  In other areas of the Country, where the immigrant population has increased, it is expected that multigenerational housing will be needed.  Overall, trends show that the number of single divorced individuals rose from 27% to 36%.  As a result, as this population ages, it is expected that markets will need to adjust and products will need to innovate to allow for example, for individuals to in effect have roommates to make housing more affordable.

Mark Hartman of Active Living indicated that in the next 20 years, 10,000 people each day will reach the age 65.  Active adults want services that make their lives easier, and are also cost conscious.  Thus, Mark sees a change in the market from bundled services, where shelter, activities, transport and food are all bundled into the cost of rent to a more an a la carte menu.  Under the a la carte scenario, residents can choose what they want to pay for, which will help residents get what they want and address financial limitations.

Philip Kroskin of Sunrise Senior Living explained that the assisted living model is not about real estate, but rather about care and service.  Sunrise thus builds its own properties to ensure that a community is built to a certain standard, but Sunrise sells the real estate, and then is hired back as the operator and manager of the facilities.  The average age of a resident is 85 years old.  Because children tend to be integral parts in selecting a location for their elderly parents, site location is critical to be in an area that would be convenient to visiting children.

Gwen Wright, Planning Director of the Maryland-National Capital Park & Planning Commission discussed a senior housing study that her department prepared.  By 2040, 46% of the County population will be over the age of 45.  In Montgomery County, individuals who are between the ages of 75 to 84 will make up 31.5% of population, and will have high levels of income of 120% of AMI (Area Median Income).  But, the incomes decline when one reaches the age of 85, and as such, Montgomery County needs to be addressing the need for the older populations.  While affordable senior housing is scarce in the County, a community called the Bonifant in Silver Spring is setting some new benchmarks.  At the Bonifant, 95% of the senior housing qualifies as affordable.  It also is strategically located in an area with many amenities, including being close to transit, retail, restaurants and entertainment.

The panelists believe that densification is important to allow greater options near urban areas with the accompanying amenities.  There is a need for new kinds of units like Accessory Dwelling Units (Granny Cottages).  The issue is that it is very difficult to find the land needed to accomplish the models that are being demanded by seniors and that economically work.  Active Living, for example, looks for sites that are at least 6 acres in size and are near to amenities.  There are no such sites in Montgomery County, and thus Active Living is focusing on other areas of the Country.  Likewise, Sunrise has found much of the immediate market saturated for assisted living facilities and has shifted their attention to other parts of the Country.

Moderator:  Janet Meyer, Principal, BCT Architects

Panelists:

• Michael Hartman, Principal – Active Living, Capital Senior Housing
• Philip Kroskin, Senior Vice President of Real Estate, Sunrise Senior Living
• Jaana Remes, Economist and Partner, Mckinsey Global Institute
• Gwen Wright, Planning Director, Montgomery County Planning Department