SENIOR HOUSING MARKET TREND: ACTIVE LIVING
The senior living market is evolving and attempting to respond to a shift in consumer wants and needs. Developers are beginning to consider a new age restricted residential product type to meet this demand, often termed, “active living communities.” In this article, we’ll examine the market trends, challenges associated with delivering an active living product and ARCO’s unique ability to solve these problems through our collaborative approach to design and construction.
TRENDS TOWARD ACTIVE LIVING
As a new generation of retirees are beginning to seek housing options, senior living developers are starting to see a shift in the needs and wants of consumers. While previous generations sought out senior living solutions that anticipated a decline in health and quality of life, the Baby Boomer generation – those born between 1946 and 1964 – is beginning to explore a different set of options as they enter retirement. Making up nearly 28% of the U.S. population, the Baby Boomer generation controls approximately 80% of personal assets and accounts for nearly 50% of all consumer spending. Unlike generations before them, most Boomers have a strong desire to enjoy a higher quality of life, especially as they enter retirement. Focused on wellness and lifestyle offerings, Boomers aren’t interested in senior living as a peace of mind option, but rather, they want a place to thrive and grow in their later years.
Active living communities are age restricted residential developments that focus heavily on quality of life enhancing features and amenities that encourage an active and social lifestyle, often with common amenity spaces on each floor. Because walkability is a high priority, active living developments are typically constructed in highly sought-after locations, near popular town centers and metro areas. The buildings feature social amenities similar to traditional senior living facilities without the value-added services of assisted living or memory care and associated price tag. This results in a senior housing product with the value of a standard market rate multifamily development. The difference in achievable rent between the two has created challenges for developers who are struggling to justify overall development costs.
Walkability is prioritized in Active Living communities. Shown here: Anthology of The Plaza | Kansas City
ACTIVE LIVING DEVELOPMENT CHALLENGE OVERVIEW
As senior living developers work to stay in front of the changing market trends, the development of active living communities is increasing, but not without challenges. For senior living developers, there is a high amount of risk associated with creating a new product type that is similar to traditional senior living facilities, but charges rent rates more in line with a standard multifamily product. ARCO can address each of these challenges by utilizing a tried and true methodology that empowers senior living developers to make value-driven decisions in the earliest stages of project planning.
UNIT LAYOUT EFFICIENCY
One of the greatest challenges faced by developers when constructing an active living facility is efficiency. In a typical multifamily facility, amenities are offered in singular common spaces, maximizing unit space and overall facility efficiency. However, active living communities often incorporate social amenity spaces on each floor, rather than reducing them to those offered in standard market rate apartments. This results in rentable space ratios that don’t work for profitable development.
In a traditional construction setting, facility designs are developed without the input of the construction team. Once designs are completed, developers then solicit bids from contractors. Only after bids are solicited is a construction price determined. Because drawings are not first designed to maximize building efficiency and without the input of the contractor, time is lost going through the bidding process for a building layout doesn’t have enough rentable space to meet the development budget.
This decrease in efficiency, combined with a non-collaborative design and construction process, is making it especially difficult to achieve active living facility layouts that both fulfill user demands and satisfy proforma requirements.
Common and amenity space to rentable square footage ratio requires significant adjustment from assisted living to active adult communities.
ARCO SOLUTION: UNIT LAYOUT EFFICIENCY
ARCO’s unique methodology addresses the challenge of efficiency by working directly with the architect during the earliest phases of a project to develop a design that works for the owner’s business and budget. ARCO can adjust drawings and offer value-engineering solutions that enable senior living developers to make informed decisions during the design process, making the most of the space while being sensitive to the development budget.
Drawing on years of experience and industry expertise, ARCO can offer design solutions that not only keep a project within budget, but also maintain the overall integrity of the facility and fulfill the developer’s vision. Throughout the design process, ARCO’s team is simultaneously estimating construction costs and can accurately conceptualize the completed project before dollars are spent, greatly reducing change orders and other unexpected costs during redesign and construction.
In addition to efficiency, rent rates associated with active living communities pose a significant challenge to senior living developers. Without luxury amenities like full-service dining and laundry and specialized services such as 24-hour nurse access and memory care, active living communities cannot justify the same high rent rates as traditional senior living facilities. For developers, there is a high amount of risk associated with creating a product that is similar to traditional senior living facilities but charges rent rates more in line with a standard multifamily product.
ARCO SOLUTION: RENT DISCREPANCY
Because ARCO understands the components of a facility that can easily increase overall cost, we can offer alternative solutions that keep a project on budget while still addressing market trends and fulfilling the desires of residents. Throughout the preconstruction phase of a project, ARCO works backwards from a developer’s budget and target unit cost to create an active living facility that fulfills those needs, while also maintaining the original project concept. By adjusting site layout, structure, façade and systems accordingly, ARCO can decrease overall project cost and lead developers to their target unit cost without spending upfront capital associated with engaging traditional design firms. ARCO’s involvement allows decisions to be made knowing the direct impact they will have on unit cost and the overall development budget.
Like traditional senior living facilities, active living communities are typically constructed in highly sought-after locations, as walkability is a high priority. While previous trends used to prioritize golf courses and club houses, the Boomer generation is drawn more to metro areas and town centers as a community focal point resulting in higher land costs. Because the land costs cannot be absorbed in higher rent rates like in a traditional senior living facility, they account for a higher percentage of the overall development proforma.
ARCO SOLUTION: LOCATION CHALLENGE
At ARCO, we empower our clients to select the best possible location for their facility. We offer value-added site selection services to ensure cost and schedule accuracy and mitigate risk. ARCO’s advanced ability to determine total cost provides early budget control and flexibility to developers when evaluating potential sites. Our site selection services allow owners to make the most informed decisions regarding the cost of land development and how to offset it in other areas if need be. We work closely with owners and developers to identify sites that will work for their businesses while keeping overall budgets in mind.
THE ARCO ADVANTAGE
ARCO’s unique methodology ultimately addresses each of these challenges through enabling value-driven decision making. Our industry knowledge and expertise allows us to provide solutions and alternatives that save valuable development dollars, while still bringing an owner’s vision to life. We understand the importance of meeting target rent rates while maintaining overall construction budgets and work tirelessly to ensure that we deliver a product that fulfills these requirements. Our collaborative approach and involvement in the earliest stages of project planning allows senior living developers to make the very best decisions for their businesses, regardless of project complexity or scale.