The Silver Train Is a-Coming … But Slowly

The boomers are supposed to be here already. Why aren’t they?

By Chris Hollister

When World War II ended, soldiers in Europe and North America went home, got married and started having kids. The baby-boom generation was underway. 

The leading edge of this massive demographic is now 74, so starting next year the first boomers will be counted in the central demographic target for senior living. The Silver Tsunami has finally arrived, right?

Well not so fast. Where are the boomers?

One of them is president of the United States and several more are challenging him for the 2020 election. Fifty years after Woodstock, many from that generation are still on the road — The Rolling Stones; Paul McCartney; Willie Nelson (86!); Carlos Santana; The Who; Crosby, Stills and Nash; Steve Miller; and Jimmy Buffett to name just a few. Others are still working or traveling or tending garden or writing books. Some are beating me at golf with handicaps so low they realistically aspire to “shoot their age.”

Entering a new era

I started in the senior living field in 1986 at the age of 25, working for what is now Greystone Communities, conducting feasibility analysis on new continuing care retirement communities (CCRCs). The central methodology for feasibility analysis of CCRCs was developed in the ‘70s and ‘80s by Big Eight (now Big Four) accounting firms. As the assisted living and now memory care platforms emerged and exploded in popularity, analysts adopted the same 75+ metric for feasibility analysis used for CCRCs.

So what’s the problem?

First of all, the CCRC methodology was primarily concerned with the independent living (IL) segment of the CCRC. Seniors who choose a CCRC tend to be long-term planners who want to make a lifestyle choice early in the aging cycle and move only once so they can age in place. Also, to qualify for residency in the IL portion of the CCRC, they must pass a rigorous health examination. 

Accordingly, using 75+ as a target demographic was and still is appropriate and supported by the experience in terms of the average age upon entrance into a CCRC. 

However, this is a far cry from the profile of either rental-only independent living — which has evolved to essentially be assisted living light — and assisted living where residents, of course, arrive already in need of significant help with their activities of daily living. 

The reality is 95 percent of seniors will not move until they absolutely, positively have to move due to concerns about health or security. Boomers are therefore not so much “not choosing our communities” as they are simply doing what most seniors have always done. They’re just reaching that point later in life.

At Pegasus Senior Living the average age of our assisted living residents is over 85, and less than 10 percent are under 80. Our experience with our rental independent living segment is not much different. In talking to other senior living leaders at a variety of companies, almost everyone has the same experience — the vast majority of residents living in our communities enter the community over age 80 and many do not move in until they are over age 85.

In the mid-1980s, seniors aged 75+ were born before World War I, came of age in the Great Depression and did not have the benefit of the great antibiotic revolution and other massive improvements in general health care that occurred after World War II. 

While the rate of disability for those age 75+ has stayed about the same for the past 35 years the rate of disability that requires significant assistance with daily activities has declined. Additionally, home health options and technology have made it easier for seniors to stay in their home and even stay connected to friends and family via the internet and social media.

Too much product

We are now into the middle stages of the third great binge of overbuilding that has afflicted the industry over the past 30 years. 

The first occurred in the late ‘90s when assisted living first became in vogue and operators from acute care, rehab, skilled nursing and hospitality jumped in at the same time. That overbuilding that lasted into the early 2000s. 

The second great wave occurred in the late 2000s exacerbated by the sudden shock of the global financial crisis that started in 2008. 

By 2011 the shovels were back and the third great binge of construction started anew. Quite a few markets are now overbuilt, occupancies have dropped or at least stalled, and operators across the country are struggling to stay full while also struggling with the tightest labor market anyone can remember.

Part of this phenomenon is unavoidable. In a free society entrepreneurs see the same opportunity and dive in simultaneously. A battle for market share ensues and the best players win. 

This is how it should be. 

But if we were all in the bowling alley business and all of a sudden there were a dozen bowling alleys in a town that for many years had one or two, perhaps people would ask: “How are people conducting feasibility studies for bowling alleys?”

Here are a few suggestions:

1. Octogenarians Only: For rental IL and AL, run feasibility analysis on the 80+ population not 75+. This metric is a relic from the past. The facts simply do not support it, so let’s face the facts. Seniors in the 80 to 84 age cohort are only 43 percent of the 75 to 84 age cohort, so this change alone would go a long way towards a more rational approach to demand analysis and a healthier supply-demand balance.

2. Be careful with the “adult children” calculation: Here’s what happens — the C-Suite says “Let’s go to Houston or Dallas or Atlanta.” The development team runs analysis and it turns out affluent seniors live primarily in dense, close-in, urban and suburban areas where land is either expensive or unavailable. 

So the development teams go to the newer suburbs and runs the numbers as primarily an “adult children” play. Sure it’s true — a fair number of seniors move to be near their adult kids. But those areas are slower to lease up, and all the new developments are counting the same finite number of adult children. Some of these markets do not need any new assisted living or memory care until the middle of the next decade.

3. Ask questions: How many feasibility reports say “Don’t go?” Is it prudent to plan a $30 million development on the back of a $15,000 feasibility study done by someone with no skin in the game? 

Yes, the Baby Boom is coming, but it’s a slow train. For rental IL and AL it won’t start in earnest until 2025. Even then, if healthcare and technology improve, more and more seniors may be able to — and prefer to — stay in their homes. 

By 2030, 90 might be the new 80, so curb your enthusiasm. If you are new to the sector, it is like being the new guy at a poker table. If you can’t identify the sucker, it might be you. 

Chris Hollister is the co-founder and president of Pegasus Senior Living, a seniors housing operator with dozens of communities throughout the United States.