According to the National Association of Industrial and Office Properties (NAIOP), there is a growing demand for senior living communities that offer luxurious amenities similar to those found in resorts. LifeCare Properties has successfully developed senior living communities with a resort-style atmosphere, including memory care services, in middle markets that are projected to experience significant population and job growth in the future. These communities, which feature high-end amenities such as outdoor courtyards, fully-equipped theaters, fitness centers, salon/spas, and chef-prepared meals with restaurant-style dining and beverage services, have the potential to provide stable returns for an extended period.
The Growing Demand for Resort-Style Senior Living
The senior housing market is witnessing tremendous expansion due to the retirement of baby boomers, occurring at a rate of 10,000 individuals per day. However, today’s seniors desire more than just a traditional retirement home. They seek communities that provide upscale amenities, abundant opportunities for social interaction and entertainment, and a strong emphasis on wellness and recreation. These communities are attracting both residents and investors.
For investors, resort-style senior living presents an opportunity to leverage significant demographic and lifestyle trends. Several key factors contribute to the potential returns, including:
- Limited competition: Upscale senior communities face substantial increased investment and development timelines, which limit the availability of new properties in the short term.
- Affluent resident base: Resort-style communities attract residents with higher net worth and disposable income.
- Competitive advantage: Resort-style communities gain a competitive edge by meeting the lifestyle expectations of their residents. This advantage contributes to long-term value appreciation, higher annual occupancy rates, and increased net operating income (NOI).
- Recession resilience: The senior housing market has demonstrated resilience during economic downturns, as the need for care and housing remains constant. Even during the COVID-19 pandemic, LifeCare Properties’ resort-style communities have proven resilient, catering to an affluent market that is less affected by economic downturns.
Why Middle Markets?
So why are middle markets so appealing? Many major metropolitan areas have become oversaturated, while mid-sized cities offer room for growth, with more affordable land and construction costs. There is also less competition from large national developers who tend to focus on larger cities.
In addition, middle markets often have lower costs of living, less traffic and congestion, and stronger community ties – all of which are attractive to older adults. Many baby boomers are migrating to college towns or places near their grandchildren. These locations offer an ideal combination of amenities, natural beauty, safety, and family connections.
Strong Potential for Investor Returns
Resort-style senior living communities present an attractive investment opportunity within the middle market real estate sector. These properties tend to have higher rates of occupancy and monthly rental income compared to traditional senior apartments or care facilities.
For investors, this translates into a reliable cash flow and substantial potential for long-term price appreciation. Research conducted by the American Seniors Housing Association reveals that resort-style senior living communities have consistently outperformed the broader senior housing market, experiencing annual valuation increases of 5-7% in recent years.
Conclusion
While institutional developers compete for prime real estate in major cities, the overlooked middle markets present lucrative opportunities. The growing aging population is driving demand, with individuals seeking amenities and a desirable lifestyle, rather than just a place to spend their retirement years. By partnering with the right capital investors and employing onsite operators who provide exceptional lifestyle experiences, property owners can establish stable and growing cash flows, ensuring sound investment returns.