As someone who is developing a senior living community for the future, I do a LOT of research about the latest developments and trends in senior housing and living. Here’s some of what we discovered about the lay of the land for 2016 and beyond.

Note: This might be too business-oriented for some readers’ tastes; I won’t be offended at all if you skip it! But if you want to look behind the curtain and see what we see as we plan your future senior living paradise, this will give you a lot of background info!  It also will help inform your decision about moving to a Retirement Community.

Trends in Senior Housing for 2016 and Beyond

Several considerations should be given Senior Housing starts in 2016. Trends from within the industry and from without are affecting the future of senior living communities in the U.S. For example…

  • Looking down the road (literally and figuratively), driverless cars are going to impact senior living as probably one of the most disruptive technologies this sector has ever experienced.
  • Any community that even smacks of being institutional is in trouble.
  • The residents populating senior living communities will become less ‘need’ driven and more ‘choice-oriented’ as they focus on improved quality-of-life, health initiatives, and socialization opportunities.

Here are some more trends that we think are worth watching:

Millennials are Changing Things for Everybody

It’s strange to think ‘millennials’ are impacting where senior communities are located, but their demographics and trends are influencing a great many societal standards. A 2014 article in Forbes made the following observations:

Every store in the world is literally in Millennials’ pockets; they can hang out with their friends, sip lattes and shop online – all at the same time. So why spend all the time and effort traveling to, and traipsing through, big, old, largely boring malls with a limited number of cool stores that don’t offer any great experience in the first place? Having thousands of places to shop quickly right at their fingertips, or in a niche boutique conveniently located across the street, Millennials are increasingly pursuing special, exclusive “just-for-me” products — because they can. Given this shift in behavior, why would they want to go to a store selling clothes that appear on the bodies of millions of their peers? And a good majority of those Millennial-targeting stores with ubiquitous brands are in the malls.

The author, Robin Lewis, goes on to suggest, “My advice is to re-think your distribution strategy and store locations. More non-mall, mixed-use neighborhood lifestyle shopping areas, and localized assortments selected according to consumer preferences would be a start.” Mr. Lewis is on to something. Within 15 to 20 years, retail consultant Howard Davidowitz expects as many as half of America’s shopping malls to fail. All across America, once-vibrant shopping malls are boarded up and decaying. While many abandoned malls are not in California, that’s because The Golden State is good at repurposing—The Kings Arena, Country Club Plaza, etc. Other malls in our immediate area that seem troubled are Florin, Sunrise, and Arden Fair to a lesser extent.

The Fall of the Mall

mall for saleAbout 15% of U.S. malls will fail or be converted into non-retail space within the next 10 years, according to Green Street Advisors, a real estate and REIT analytics firm. That’s an increase from less than two years ago, when the firm predicted 10% of malls would fail or be converted. This is a rapid change that affects Senior Living Communities who think the smart thing to do is build a community adjacent to a mall or in an Urban Center with lots of shopping. That’s old thinking but few strategic development officers in the senior sector are willing to accept this fact: In times of rapid change, experience is often your worst enemy.

Demand is Up, but So is Age of Entry

It’s not that demand for senior housing is showing any signs of slowing. NIC (National Investment Center for Senior Housing and Care) reported senior housing occupancy increased to 90.1% in the fourth quarter of 2015 as strong demand surpassed inventory growth for a second consecutive quarter.

The New Retiree: Living Longer, Living Better

Click the image above to learn more about “The New Retiree”

Further, net absorption of seniors housing units outpaced the additions to inventory representing an increase of 0.2 percentage points from the previous quarter. Independent living properties averaged 91.4% during the fourth quarter of 2015 an increase of 0.2 percentages over the previous quarter. The rate of senior housing’s annual asking rent growth during the fourth quarter of 2015 was up 2.6%.

However, new communities must recognize the fact there is an increasing age-of-entry for new residents into private pay senior housing. Because the near-term growth in the senior population is concentrated in the “younger” 70 – 75 age group, independent living properties must appeal to this group with healthy-living initiatives that will keep residents active and independent with nutritional farm-fresh foods, activity-based exercise, and educational programs.

How to Ensure a Competitive Advantage in Senior Housing

In order to outperform the industry in the near term, here’s what communities should consider:

  • Build your community in high barrier-to-entry markets
  • Design property to attract under-80 seniors by focusing on independent living rather than assisted living
  • Rethink locations and amenities to appeal to “younger” seniors; consider the area’s attractiveness as a retirement destination
  • Provide support services on-site
  • Make community design new, fresh and non-institutional, abandoning ‘standard’ features like overbuilt central club houses and/or restaurants

New communities need to place a decided focus on creating places where people want to live, not where they need to live. This will include housing that allows people to seamlessly move from independent living to health services if needed.

Successful new communities will consider facilities for lifelong learning and wellness centers that go beyond basic fitness to help people age vitally and successfully. Wise developments will create partnerships with churches, colleges and others to foster vibrant communities and intergenerational relationships, as well as investing in technology that promotes independence and wellness.

Northern California: Home to Many Top-Ten Markets in Senior Housing

Geographically, Sacramento (3), San Jose (6) and San Francisco (10) all ranked in the top-ten markets with the highest senior occupancy according to the 2016 Senior Housing Research report from Calabasas, Calif.-based Marcus & Millichap. With a renewed strength in the housing market, seniors who were once trapped in mortgages are now able to sell their homes and become renters. The report also credits cap-rate compression in other sectors as the driver for financial investment enthusiasm in senior housing, primarily from nontraditional investors. Purchasing and operating an independent living facility will yield healthy returns, the Marcus & Millichap research indicated.

Build for Living, Not for Dying

Senior Living Area 2016Successful new 55+ communities need to be built on the premise that “aging is all about living.” Projects today must include vibrant interior courtyards that create a “town square” where people can grab a scone, a cup of Starbucks and a seat to read The New York Times or Wall Street Journal or meet with friends. A feeling of “home” is of complete importance so there needs to be fireplace lounges and libraries.

In senior apartments, residents need to find everything they loved about their home – kitchens, dishwashers, washer and dryer, large closets, and outdoor decks and garden areas – with one important caveat. The residence needs to be right-sized, so people have space they use rather than waste. Of great importance are windows bringing in natural light and opening to nature.

Find a way to combine these considerations with a natural setting and a slower pace, and you’ve built a better mousetrap for the new generation of retirees.