To be sure, members of the baby boom generation are retiring just about everywhere. Still, some areas are more popular than others, particularly for retirees who have the net worth that gives them the freedom to choose.
Not surprisingly, warm weather states like Florida and Arizona continue to experience huge boomer in-migrations. But certain not-so-warm regions also are also booming.
What these locations have in common is that they allow them to maintain an active social life. And there’s another consideration: proximity to adult children—and the next generation of babies.
Multifamily developers that have entered and succeeded in the senior living rental market point to factors like these when determining where to build projects. Given the size of the boomer generation, the senior living market can look very tempting. But it’s not a market that multifamily developers should enter without understanding why boomers choose to retire where they do.
Looking at the Numbers
Minneapolis-based builder and developer Ryan Companies US Inc. has been active in the senior living market for 15 years, first as a builder and now as a builder, developer, owner, and asset manager. The company’s senior living team plans to break ground on 16 projects during the next 22 months in major metropolitan areas in Arizona, California, Florida, Illinois, Minnesota, Tennessee, Texas, Washington, and Wisconsin.
Ryan is developing projects both inside city limits and in nearby suburbs. In order to pinpoint an optimal location, it analyzes a vast trove of demographic data. “We go wherever the data tells us we should be,” says Julie Ferguson, Ryan’s senior vice president of senior living.
What kinds of data does Ryan study? Take a look at Texas. According to 2019 U.S. Census American Community Survey data, the Lone Star State’s population is expected to grow by 7.9% from 2020 to 2025, compared with a national rate of 3.7%. During those same five years, the population of people 75 and older with an annual income of $75,000 or more will increase by 43.8%. Little wonder that Dan Walsh, Ryan’s senior vice president of senior living development, moved from Chicago to Dallas in mid-May.
“We still have some opportunities in the Midwest that we’re pursuing,” Ferguson says. One of its newest senior living developments is Clarendale Six Corners, a 10-story project on Chicago’s North Side that broke ground in January.
That noted, Ferguson says that Ryan will be “focusing our efforts the next couple of years on markets where there is high demand, particularly in the South and West. We just have to find the right location within those markets where the demographics make sense.”
All in the Family
In identifying potential locations, Ryan not only looks at the number of seniors in these markets. It also discovers where their adult children live.
There’s an excellent reason for including that datapoint. Research from Zonda, Multifamily Executive’s parent company, shows that about 25% of baby boomers plan to retire near their grandchildren. In 2020, the top three cities on Zonda’s “Baby Chaser Index” were Charlotte, North Carolina; Austin, Texas; and Phoenix. The top 10 also includes Denver and Indianapolis, cooler-weather cities where boomers’ children have built successful careers. These also are places that provide retirees the opportunity to live comfortably after downsizing.
Where retirees’ adult children live is also a critical factor that Scottsdale, Arizona-based multifamily developer Alliance Residential Co. considers when locating a senior living project. For Alliance, which entered the senior housing market about six years ago, that means metropolitan areas with solid high-income job growth, such as the Bay Area, Seattle, and Orange County, California. Alliance has 16 projects either completed, under construction, or in development, focusing on the West Coast and its home state of Arizona. It also has two projects underway in Florida.
These are, of course, highly competitive markets, often with high barriers to entry. To stand out, Alliance is “bringing that multifamily viewpoint and lifestyle expectation and applying it to our senior projects,” says Dale Boyles, Alliance’s managing director for senior housing. Standard elements include full kitchens and fully landscaped exterior spaces (along with senior-centric amenities such as zero-threshold showers).
“A majority of our projects are ‘one ring out’ from major cities,” Boyles says. But many are within the boundaries of these metros, including city centers. “We’re not afraid to go into an urban downtown setting if the opportunity exists and the demand characteristics are there,” he adds.
For instance, Alliance recently broke ground on a 16-story senior living project on the north end of Portland’s upscale Pearl District, where residents will be able to enjoy cultural events, adventurous dining, and other urban pleasures. The company also is constructing a project in downtown Bellevue, a tech-hub city with what Boyles calls “a major growth story.”
A developer intrigued by the senior living market needs to realize that demand involves more than where large number of boomers are retiring. As Boyles notes, “senior housing is three businesses in one—hospitality, real estate, and health care. If you fall short on any one of these, you’re going to struggle.” Location is crucial. But it’s no guarantee to success.