DALLAS — The evolution of active adult product is in the third inning of a nine-inning game, but some markets are clearly ahead of the curve, says Zach Crowe, managing director of U.S. real estate for private equity giant The Carlyle Group.
“There are markets like Dallas, Las Vegas and Denver that have had active adult for 20 years at this point, and the product is well known. The consumer understands what it is. There are other markets with very few properties, and people have no idea what it is. It’s still incredibly early [in the game],” reports Crowe, who is based in Washington, D.C., and focuses on real estate investment opportunities in multifamily, 55+ housing and medical office properties.
The insights from Crowe came during the CEO panel at the fifth annual InterFace Active Adult conference. The daylong conference, which took place May 7 at The Westin Los Colinas in Dallas, attracted more than 300 industry professionals.
Moderated by Ryan Maconachy, vice chairman of health and alternative assets for Newmark, the panel also included Adam Cohan, managing director, Greystar; Jeff Patterson, co-founder and CEO, Sparrow Partners; Laurie Schultz, principal and co-founder, Avenue Development; and Michael Uccellini, president and CEO of The United Group of Companies.
Compelling Supply-Demand Trends
Active adult rental communities are age-eligible, market-rate multifamily properties focused on enhanced lifestyle programming without providing meals, according to the National Investment Center for Seniors Housing & Care (NIC).
The combination of a limited inventory of active adult rental properties and a growing demand for age-restricted housing bodes well for owners and operators in the space, said Crowe.
NIC MAP tracked nearly 800 active adult rental communities totaling roughly 118,000 units nationally in the first quarter of 2025. Meanwhile, based on 2020 census data, the U.S. Census Bureau estimates that the baby boomer population (persons born between 1946 and 1964) has reached about 73 million.
“The inventory that exists versus the level of demand that is out there across the United States — it’s a fraction,” said Uccellini of Troy, New York-based United Group. “So, I concur that we are still [in the early innings] because there’s just such a long runway for us in multiple markets.”
To put those inventory numbers for the active adult sector into perspective, consider that developers in the conventional U.S. multifamily market deliver between 300,000 and 500,000 units annually. The size of the active adult market pales by comparison.
The greater the number of happy customers in the active adult marketplace, the more the product type will spread by word of mouth, leading to an increased preference for age-restricted housing, predicted Crowe.
With 10-plus years of data now available on development, construction, lease-up and property sales, the active adult industry has established a successful track record, emphasized Uccellini.
“There’s data out there that shows cap rates and the changes in rents. So, that’s very positive for the appraisal community, the lender community and the equity community,” he noted.
Despite the favorable supply-demand fundamentals, the active adult space is fraught with lease-up risks, cautioned Crowe. “Everybody knows that leasing these properties is very challenging. That’s the risk of the asset class, and we view that as a barrier to entry. You really need to have expertise in terms of sales and marketing and your onsite staff and hiring,” he emphasized, citing Greystar, United Group and Sparrow as highly successful operators who know what they’re doing.
Knowing how many units to build is vitally important to minimize lease-up risks, explained Crowe. In the past, he observed some developers build 250-unit communities, which turned out to be too big considering that move-ins were occurring at a pace of five to eight a month.
How Rents Stack Up
Maconachy, the panel moderator, pointed out that the original idea behind active adult was for the product to fill the gap between multifamily and independent living. The theory was that rents at active adult communities would be a premium to multifamily housing and a discount to independent living. He asked the panelists if the percentages in those rental premiums or discounts have shifted over time and to what degree.
At Greystar, the original thesis was that active adult communities would command a rent premium of about 25 percent compared with traditional multifamily properties, according to Cohan. In practice, the rent premium ranges between 20 and 35 percent. Conversely, Greystar’s goal was for active adult rents to be roughly a 50 percent discount to independent living.
“There’s no question that’s proven out,” said Cohan, referring to the original thesis. “If anything, those premiums [to traditional multifamily product] are now widening because you’re seeing multifamily rent growth kind of stall out, yet we’re still getting really strong rent growth in our active adult portfolio.”
Uccellini said the lifestyle programming at properties operated by the likes of United Group, Sparrow and Greystar generate the healthy rent premiums compared with traditional multifamily product. In fact, United Group has experienced 20 to 70 percent rent premiums to the traditional multifamily product, depending on the markets in which its communities are located and the macroeconomic climate.
United Group aims for its active adult properties to be a 30 to 50 percent rent discount compared with independent living communities, but Uccellini said that’s becoming increasingly difficult because many independent living properties built 15 to 20 years ago are becoming quite dated and haven’t experienced rent growth.
Customized Solutions
Indianapolis-based Avenue is a full-service development and construction company focused on healthcare and seniors housing. Avenue’s active adult brand, Viva Bene, is the first to integrate preventive healthcare into the active adult sector. Viva Bene St. Peters, located about 30 miles northwest of St. Louis, opened in April.
The 161-unit community provides a holistic wellness hub with fitness, yoga and meditation classes, a fully appointed gym, healthy cooking workshops and other wellness-focused experiential education.
While many active adult communities have targeted well-heeled seniors, Schultz said many older Americans aren’t as financially well off.
“There’s a huge component of aging Americans in this country that don’t have that nest egg, and so how do we reach them too? Our markets are more Midwest. We are definitely seeing pricing concerns with the consumer right now,” noted Schultz.
Avenue is encountering more consumer demand for one-bedroom units, for example. Schultz said Avenue doesn’t want to go smaller with the unit size because studio apartments don’t sell well in the active adult space. At the same time, the preference of boomers is to have customized spaces.
So, the question for Schultz and her team becomes how can Avenue integrate the customization aspect into the development process without increasing its cost basis?
“We do a lot with trying to change finish colors. Even though the finishes may not be top end, what if [the consumers] had a choice in color selection in hardware, cabinets, paint and tile, and it was at the same price point? That makes them feel like they have that customized aspect without changing cost.”
Schultz explained that this customization component only applies to the first generation of residents moving into a property, but not again upon turnover.
Priorities Matter
Sparrow Partners, based in Austin, Texas, is a vertically integrated developer and operator of 28 active adult communities in Phoenix, Texas and Florida, and recently closed a development deal with Caryle in Atlanta on a ground-up project.
Patterson said that even though his firm — and the industry as a whole — has become quite adept at cutting costs and delivering a quality product at the right price point, a development’s success or failure largely hinges on the performance of the onsite team, starting with the community manager, also referred to as an executive director.
“If they don’t love the residents and don’t spend half their time engaging with them and being responsive instead of [focusing on] their paperwork and their time in the office on the computer, it just is not going to work,” said Patterson.
Tariff Troubles Overblown?
Uccellini believes the tariff issue has been “blown out of proportion,” although he acknowledged that the reciprocal tariff strategy that President Donald Trump rolled out in April to level the playing field in international trade and spur more manufacturing in the U.S. led to chaos in the short term. For example, the stock and bond markets exhibited a high degree of volatility in April.
“But at the end of the day, in a development or construction deal, labor is 60 to 70 percent of the deal, and it’s not subject to tariffs, right? If you’re building with lumber and you’re in the South, you’re buying the Southern Pine that’s not subject to tariffs,” said Uccellini.
Meanwhile, the Trump administration has at least temporarily exempted Canadian softwood lumber from the 25 percent tariffs. A 14.5 percent duty on Canadian lumber set by the Department of Commerce in August 2024 remains in place.
“When you look at what things that are [truly] going to be potentially impacted by tariffs and only 30 percent of that is the cost of materials, it’s really de minimis at the end of the day,” said Uccellini.
But lenders are cautious by nature, he noted. They want to know the cost increases developers are building into their construction budgets to account for tariffs.
Bullish on development
Despite the myriad challenges facing developers, the panel agreed that creativity, persistence and timing can overcome some of the biggest obstacles.
Greystar manages approximately 140 active adult communities, about half of which it either developed or acquired, according to Cohan. Greystar also is the nation’s largest apartment owner and manager, according to the National Multifamily Housing Council. As of Jan. 1, Greystar owned 122,545 apartment units and managed 946,742 apartment units.
Of the 37 or so projects Greystar is developing this year, only a handful will be active adult properties.
“You have to be highly selective on your opportunities. It’s not easy,” acknowledged Cohan.
“If you find the right opportunity, you will get paid for the dollars you spend on entitling dirt today and making it feasible 12 to 18 months from now. And there’s probably a lot of upside that you’ re not underwriting in your base case,” explained Cohan. For example, cap rates could go down while rents continue to rise.
“If you power through it and pick your opportunities right, there’s a lot of upside in development.”