DALLAS — Developers in the active adult sector are subject to the same struggles as any other sector. Interest rates are as high as they’ve been since before the Global Financial Crisis of 2008, making construction financing difficult to attain. Construction costs, both for labor and materials, have skyrocketed since the COVID-19 pandemic began. Quality sites are few and far between.
But for developers that can overcome those challenges, there has rarely been a market as ripe for new construction as active adult, according to Michael Hartman, principal of active living with Capitol Seniors Housing.
“An undersupplied market with growing demand is a good marketplace to be. That’s basic, obvious, objective fact. You have very low supply, growing and robust demand on multiple levels. That’s a good recipe for any economic marketplace despite all the headwinds.”
Hartman’s comments during a panel at the third-annual InterFace Active Adult conference held at the Westin Galleria Dallas on Thursday, May 4. The day-long event attracted nearly 365 industry professionals.
The panel, titled “Development Update: How to Identify Sites, Build a Winning Product and Maintain Your Brand” also featured Akash Gaur, president, Discovery Development Group & Discovery Design Concepts; Michael Levine, senior managing director, active adult, Greystar; moderator Gaurie Rodman, vice president real estate strategy and development, Direct Supply Aptura; Michael Hartman, principal – active living, Capitol Seniors Housing; Laurie Schultz, principal and co-founder, Avenue Development; and Mitch Brown, principal, Senior Housing Consulting.
Despite the strong demand and low supply, the panelists did warn: That doesn’t mean you can just build anything anywhere. The active adult resident is a discerning consumer and the offering is a lifestyle-based product, unlike private-pay seniors housing, which is a needs-based product.
“It’s very consumer driven and very, very market driven,” said Rodman. “That’s somewhat of a first for seniors housing. People aren’t being shoved into this product. They’re making the choice to come in.”
Because of this lifestyle, the developers said they all use psychographic data in addition to demographic data when researching a market. While demographics will tell a developer the number of people in an area who are of the proper age and income, psychographics tell that developer what those same people want out of their lives.
Levine suggested developers ask a series of questions before settling on a location.
“We need to look at, not just that there’s senior density or the price point is okay, but what is that senior looking for? What does that community need? Are residents moving to the area? Are adult children moving to the area? Or is it a true destination where we have to spend more and more marketing dollars to pull people to the area?”
Approaches vary
Several of the panelists noted that one reason active adult is so popular right now is that competition isn’t very strong — each developer has its own approach, meaning it’s very rare that companies are stepping on each other’s toes, according to Gaur.
“This is still a big, wide space. Everybody’s looking at it from their lens, whether it’s seniors housing, multifamily or just from a lens of investment.”
When describing Discovery’s approach to the market, Gaur said the company targets a high-end consumer. Walkability and amenities in the surrounding neighborhood are paramount, he added.
“We did very structured, disciplined consumer research into defining our target customer portrait. To us it was a much more discerning consumer. We can’t really put them into a category. They seek new experiences. They’re much more venturing. Curating locational context becomes very important. The location drives the experience for us. So we are very disciplined about what sites we go to. It has to have some destination appeal.”
For Avenue, Schultz said the company differentiates itself through healthcare partnerships, helping residents stay healthy and mobile.
“Our thesis is if we can keep a resident healthier longer, they’re going to have longer length of stay. That’s great for all of us,” said Schultz. “You have to be lucky enough to find a site that works for your prototype. It’s a needle in a haystack. There are no easy sites now. Everything has entitlement challenges. Everything has challenges with utilities and site costs.”
Brown, a 30-year veteran of seniors housing, noted that the current state of the active adult sector reminds him of the early days of assisted living.
“Assisted living broke onto the scene in the late 1990s, much like active adult is now. Capital rushed in, there was overbuilding, a lot of new players, there were a lot of lessons learned and then the industry matured and stabilized.
“I see active adult in a similar light. We’re in the early beginnings. It’s a privilege to talk to a lot of people in this room who are all looking at it slightly differently, and that’s healthy, the fact that it’s not one size fits all. If you think about it that way, everybody can do well without stepping on each other.”
— Jeff Shaw