Robust leasing trends and strong demand are creating a prime opportunity for development of active adult rental communities, according to a panel of experts.
The National Investment Center for Seniors Housing & Care on Wednesday co-hosted an active adult market update panel with Senior Housing Consultants to showcase the relatively new product type that promotes a modern and wellness lifestyle.
Occupancy rates are close to 93%, on average, within the almost 800 active adult communities tracked by NIC MAP Vision. With a penetration rate of half a percent — compared with the senior living (independent living and assisted living) penetration rate of 10% to 12% — there is quite a bit of demand for the active adult product type, according to NIC Senior Principal Caroline Clapp.
But with that potential comes challenges.
Adam Cohan, senior director of portfolio management for Greystar Development, said that any company entering the active adult market needs to make a commitment and build a platform specifically for that product type. He added that multifamily operators entered the space thinking it looked similar to multifamily, but the execution and the ability to operate is different in the active adult space.
Calling active adult a “hybrid business” between multifamily and senior living, Senior Housing Consultants Principal Mitch Brown said that senior living operators have shown interest in moving into the active adult space, but they also are cautious, as active adult takes a different mindset, particularly with staffing.
Affordability draws interest
Active adult communities are gaining traction, Brown said, due to their affordability. Cohan said that 90% of active adult renters cannot afford rents for independent living, which are twice as high as active adult rent. Baby boomers, the oldest of whom are 78, also are sensitive to what they are paying and are looking to make their wealth last in a time when people are living longer. Those factors are helping active adult become an important place within senior housing from a demand and affordability perspective, according to the panelists.
“Independent living is still largely unaffordable to so many,” Cohan said. “Active adult is becoming — has become — an attainable option for seniors, and independent living is not.”
Along with pricing, Zonda Advisory Managing Principal Kimberly Byrum said, it’s important to define the unit mix. People are downsizing, but they aren’t looking to move into a tiny studio apartment for five years. Instead, one-bedroom, 1,400-square-foot active adult units are popular in most markets, as more incoming residents are solo agers, with an average age of 71 to 73.
Brown said that like the continuing care retirement / life plan community world, people are looking to stay in the active adult environment for as long as they can. Byrum agreed, adding that active adult properties have the opportunity to provide socialization to a new group of people interested in living in social situations.
Wise planning needed
Brown said active adult is at an inflection point that is similar to where assisted living was in the late 1990s — a new asset class that is not fully understood but is needed and is in a time of experimentation and rapid growth.
For assisted living, he said, that rapid growth led to a large influx of capital and many people jumping into the space. The outcome, Brown said, was that too many assisted living companies sprang up, leading to later consolidation and struggles.
“No one wants to see that with active adult,” Brown said. “We welcome more investment, more growth, more people, with the caveat that we all need to be wise about how we approach it.”
