Future Is Bright for Senior Living Development in the Twin Cities
Exciting times are in store for the senior living industry. A massive generation of baby boomers is entering the golden years of retirement and beyond, driving a wave of demand for seniors housing.
The U.S. Census Bureau estimates 78 million baby boomers were born between 1946 and 1964. The youngest boomers are 54 this year and the oldest are 72, so we are just eclipsing the front end of the wave.
In 2029, just 11 years from now, all baby boomers will be at least 65 years old, with the vast majority beyond age 65. This group will represent 20 percent of the U.S. population, and that is when the wave may start to resemble a tsunami.
Strength in numbers
Demographers agree that circumstances are favorable for growth in the seniors housing market, and the real estate industry is responding. In the Twin Cities, market conditions are balanced with an adequate supply of seniors housing to handle the first groups of seniors moving in. At this time, we observe that the greatest demand is for independent living versus assisted living, memory care or skilled nursing.
Overbuilding has not been an issue in the Twin Cities and most of the Midwest region, with the exception of a limited number of geographic pockets where supply is currently outpacing demand. Given this outlook, we have confidence in the market and believe that supply will be absorbed.
From a macro or national view, some sources note that there is softness across the seniors housing market. However, from a micro level, cities within a larger metropolitan area can have low vacancy and high occupancy for seniors housing. Opus observed this trend and determined that Minnetonka, Minnesota, was an ideal niche market to address this demand.
Other real estate developers and investors are also evaluating the demographics and beginning to ride the tide of demand as they look at micro markets. In the right locations, we are confident that the demand will increase exponentially.
Opus perceives senior living as a demographic, data-driven business. More than any other sector in our portfolio, data is the primary driver for seniors housing decisions, helping us determine the product type and navigate opportunities. For instance, when we evaluate a specific site, we first determine initial baseline demographics for the senior population. As we project out 10 years, those demographics triple and quadruple, and the wave will multiply from there.
At this time, Opus is focused on projects in desirable locations that offer the full continuum of care for residents. Often referred to as “aging in place,” these projects offer residents independent living, assisted living and memory care.
Discerning baby boomers
Baby boomers are unlike any generation before or after them. Many have abundant discretionary incomes, more than any previous generation, and are accustomed to purchasing whatever they want or need. For most, moving into a senior community is more of a lifestyle choice than a medical necessity. They want well-appointed spaces with amenities and programs that enhance their lives. They are redefining life after retirement. And developers are responding.
Tailored to meet the expectations of today’s individuals looking for seniors housing options, Opus is developing and building Crest Ridge Senior Living, a 147-unit project in Minnetonka.
It’s designed to provide a full continuum of care, including independent living, assisted living and memory care. This project allows Opus to not only meet the needs of today’s senior population, but also to anticipate the large group of baby boomers who will drive future demand for housing options.
Residents and their visiting families and friends will enjoy a comfortable environment with many amenities, including a salon, chapel and club room. Residents will be able to choose from two dining rooms, and enjoy a community room and outdoor space with a memory care garden and water features. The project is scheduled for completion in April 2019.
Senior living developments like Crest Ridge are different from our typical merchant-build real estate development projects. Once construction is complete, the property becomes an operating business owned by the developer that needs to be managed. Therefore, it’s critically important to partner with best-in-class operators that can provide the types of services seniors require. It’s a contractual, shared effort to enrich residents’ lives with a full continuum of care.
At Opus, senior living is one of our most exciting pursuits. We are optimistic about opportunities in this space moving forward. Demand drivers within the asset class are not as dependent on the economy, but rather the simple shifting of demographics.
— By Matt Rauenhorst, vice president of real estate development, Opus Development Co. This article originally appeared in the March 2018 issue of Heartland Real Estate Business magazine.