Texas has the two most active development markets in the country in San Antonio and Austin, but other metros aren’t far behind, according to senior living consulting firm Plante Moran and the National Investment Center for Seniors Housing and Care (NIC).
During the first quarter of 2014, there were 5,349 assisted living, independent or memory care units under construction in Austin, Dallas, El Paso, Houston and San Antonio, NIC data shows. By the first quarter of 2015, that number had risen to 6,525 total units, a 22 percent increase.
In San Antonio, there were 1,781 seniors housing units under construction in the first quarter of this year, representing 23.5 percent of existing inventory. Austin’s 920 units under construction accounted for 15.4 percent of that market’s existing inventory. Those were the highest two percentages of any major market in the United States.
Seniors housing construction in Knoxville, Tenn., represents 14.9 percent of that metro area’s existing inventory, according to Plante Moran. That puts Knoxville in third place behind Austin.
Columbus, Ohio, follows close behind at 14.5 percent, after which there’s a drop to approximately 12 percent in Houston, Texas, and Sarasota, Fla.
“Knoxville has shown an increase in occupancy from last year to this year, despite having so many units under construction,” says Jamie Timoteo, a manager at Plante Moran. “They have the demand to meet the supply.”
In Columbus, the occupancy rate dipped slightly from 92.7 percent to 91.5 percent during the same period, keeping it above the national average of 90.2 percent at the end of the first quarter, according to NIC.
The development surge in Columbus has been particularly sudden. In the first quarter of 2014, the city had 473 new units under construction. In the first quarter of 2015, that number had more than doubled to 1,035.
“They’ve added a lot to the construction pipeline,” confirms Timoteo. “The units haven’t hit the market yet, but it will be interesting to see, when they do, how the market will absorb the new supply.”
The Columbus metro area should expect a further dip in occupancy, perhaps falling below the national average, says Timoteo, but “they have strong demographics for that entire metro, so I wouldn’t be surprised if within a couple quarters they rebound to what they’re currently running at.”
Aiding the growth of Columbus’ seniors housing market is a revitalization of the city, says Timoteo. New retail and urban developments are leading people to downtown.
“The city has a ton going on. They’re doing a great job making it one of the stronger middle-market locations in the country,” says Timoteo. “The way they’ve been able to turn neighborhoods around has created a ton of opportunity for multifamily and seniors housing. Developers see people want to live in the city, and they’re developing or adding on to existing campuses.”
Although Timoteo recommends always approaching a market cautiously and thoroughly vetting the area, the high level of development activity doesn’t necessarily mean an area will be overbuilt.
Seniors housing can be extremely local. Seniors who move from their homes to an independent or assisted living facility will generally only relocate within 10 miles, or will move close to where an adult child lives. This demographic pattern means regions with high levels of development may still have pockets that are underserved.
“San Antonio is developing 1,700 units, but there may be pockets where there’s not a lot of development,” says Timoteo. “If that’s the case, you still may have demand — even with all these units coming on line.”
— Jeff Shaw and Haisten Willis