Clear Information, Smart Analysis Fuel Successful Seniors Housing Market Studies
PHILADELPHIA — If you own a piece of land that you think might be suitable for a seniors housing development, what is your best course of action to determine the feasibility of such a project?
“The first step is to do a desktop study,” advises Cheri Clarke-Doyle, senior vice president of Trammell Crow Co. In other words, conduct a supply-demand analysis that projects demand based on current supply and population growth within a radius of five to seven miles, or a 15- to 20-minute drive time.
If those analytics turn out to be favorable and help justify the site to the prospective operator or equity partner, proceed to the next step, urges Clarke-Doyle, who is responsible for sourcing and overseeing new healthcare, wellness and science development in the Northeast for Trammell Crow.
“Once you get the results of that desktop study, I think you go into other factors relative to the site. Those factors include the size of the site: Will it support what you want to build? If you’re doing a specific prototype, will the prototype fit on that piece of land? It’s important to go through several checks on the land before you go into a more detailed study.”
The insights from Clarke-Doyle came during InterFace Seniors Housing Northeast in Philadelphia on Nov. 13. The one-day conference held at the Sonesta Philadelphia Rittenhouse Square attracted more than 250 professionals from across the seniors housing industry.
Moderated by Susan Brecht, president of Brecht Associates, the panel also featured Zach Bowyer, senior managing director for CBRE Valuation & Advisory Services; Scott Gensler, vice president of business development for Erickson Living; and Lana Peck, senior principal with the National Investment Center for Seniors Housing & Care (NIC).
How does a market gain the attention of a seniors housing developer? In the case of Erickson Living, size matters. The Catonsville, Maryland-based company — which operates private-pay continuing care retirement communities (CCRCs) that require a refundable entrance deposit and a monthly service fee — researches the number of age- and income-qualified homes that are in each of the major metropolitan areas.
“We are not in a lot of the smaller markets that a lot of other communities are in because of our scale,” said Gensler. “We want to be able to have a project that could easily serve 1,500 people, so we’re looking at the top ones.”
Charlestown, for example, is a CCRC operated by Erickson that is located on a 110-acre campus in Catonsville, Md., which borders Baltimore. Eagle’s Trace, another Erickson community, is situated on a 71-acre site in West Houston.
All totaled, the company currently operates 19 CCRCs serving approximately 25,000 residents across 11 states. Siena Lakes in Naples, Florida, which is currently in the development pipeline, will be Erickson’s 20th community. Siena Lakes will be situated on a scenic 29-acre campus and will include 355 independent living apartment homes and 65 continuing care beds. Starting dates for all phases of construction will be established in the upcoming months, according to the company.
Erickson’s strategy of focusing on scale makes it stand out in the industry, Brecht told Gensler. “Your model is quite interesting. We’ve all been intrigued by it.”
Consumer research is invaluable
While developers need to be up to speed on the penetration and occupancy rates of the marketplace in which they are considering building a community, the interpretation of that data is what’s most important, emphasized Gensler. That’s the point at which consumer research plays a key role in the decision-making process, he believes.
“If you are in a market that is highly penetrated and has high occupancy, you may say it is potentially saturated. Or you may say there is a ton of opportunity here because people like the product. You want to dig into that,” said Gensler.
Erickson takes a methodical approach to conducting consumer research in the markets in which it wants to develop CCRCs. The process begins with a mail survey circulated in the local community followed by a phone survey. Then Erickson invites prospective residents to seminars.
Taking those steps yields quantitative and qualitative results that help Erickson calculate demand for its product.
“You get a lot of information about how they feel about your site, how they feel about this industry, this product, what price point they’ll buy at, and I find it really helpful,” said Gensler.
The need for a market study isn’t just limited to new ground-up development projects, said Peck. A planned expansion to an existing development can also trigger the need to conduct a market study. “It’s important to get out there and make sure you understand how the market may have changed since the property has been opened, and to also just get an understanding of how the demographics may have changed.”
Know your competition
The panel also addressed the importance of gathering data on competitors. “The most sophisticated market analysis is pretty much useless if you don’t have the right input,” said Bowyer, who has conducted many market studies for clients over the course of his career.
That means new entrants to a market need to have a firm handle on the rental and occupancy rates of existing competitors as well as the composition of their unit mix. How much of the existing supply is assisted living, independent living or memory care, and how old is that product?
“We’ll call every zoning and planning board within the primary market area. You want to know not only what NIC (MAP) is looking at in terms of properties under construction, but also what’s in the pipeline because that can hugely impact the results of your analysis,” noted Bowyer.
Gensler said he pays much more attention to the product a competitor is offering than the tagline in its marketing message. “What finishes are they offering? How big are the units? What are the price points from a positioning standpoint?”
‘Nuggets’ of information augment data
Metrics often don’t tell the whole story of a market, said Bowyer. For example, let’s say the average occupancy across a particular market is 86 percent, which is relatively low.
“Then you go and meet with one of the competitors, and their marketing director is nowhere to be found, they don’t have a brochure, and it becomes very clear immediately that this property is having a management issue that is dragging down market occupancy. So you get those nuggets when you walk in the door and you talk to people,” explained Bowyer.
Peck, who has amassed two decades of experience in market research, said that during her days of conducting feasibility studies, she found the latest construction project information from Dodge Data & Analytics to be quite helpful.
“I’d love to look at the pre-planning and the planning phases to get an idea of what the developers felt was going to be a viable product in the marketplace,” recalled Peck. “If there was a lot of assisted living, planning or pre-planning, that might be an indicator that there might be some space for assisted living there. Or it might be an indicator that maybe we don’t want go into that market because there is going to be a lot of assisted living there.”
Reaching out to planning agencies during the information gathering process can prove to be an illuminating exercise, said Brecht.
“Sometimes what you find out when you’re going through the process of calling the planning agencies is that somebody had a proposal in two years ago, and they haven’t heard from them again,” pointed out Brecht. “Well, that’s a pretty good indication that something is getting in the way of that development, and you only find that out by making those phone calls.”
— Matt Valley