Surfing the Next Silver Wave
SAN FRANCISCO—Wouldn't it be convenient if someone had clear, intelligent answers to most of your CRE-related questions? Problem solved. Nina J. Gruen, a.k.a. Ms. Real Estate, a.k.a. the principal sociologist overseeing market research and analysis at Gruen Gruen + Associates, is here to answer readers' questions.
Have a question for Ms. Real Estate? Click here, and it may appear in a future column.
Dear Ms. Real Estate:
I am considering developing senior and/or assisted living communities for the retiring Baby Boomer generation. Because the Boomers are such a large generation, I figure concentrating on this demographic is likely to be profitable for years to come. Do you agree with my contention, and if so, what type of housing product/community should I be focusing on?
—Surfing the Next Silver Wave
Dear Silver Wave,
You are certainly correct in the fact that the Boomers are aging. This demographic, born between 1946 and 1964, currently range in age from 50-68 and number about 78 million, or about a quarter of the total U.S. population.
However, the way you phrase the question suggests you believe that this age group will be seeking senior housing and/or assisted living in the not too distant future. But this generation differs significantly from previous generations. In one all-important respect, the Boomers have “seen their parents age and have decided against it.”
Many have had the experience of settling their parents in specialized facilities for aging and ill seniors, and decided at that time such accommodations are not for them. Does this mean they will not end up in an assisted living facility? No, it does not. But what it does mean is it won’t take place for many of them until their mid to late 80s, rather than their late 60s or 70s.
Further, many Boomers are not retiring at their 65th birthday -- some because they are trying to make up for their financial losses that occurred in the recent Great Recession, others who are still paying off their children’s higher education debt, and still others because they enjoy their work and see no reason to stop at this point in their lives.
This does not suggest that a proportion of upper middle income Boomers will not decide to sell their suburban homes and move to condos providing high levels of services in high amenity central city and suburban locations catering to this generation. What this demographic is seeking is a very high level of services, including housekeeping, on-site repairs, and when called upon, pet walking. And they will certainly not settle for the low quality of food associated with many of their parents’ facilities!
Some of these higher income Boomers will seek more idyllic (less urban) locations with forest, water or wine country settings. At the same time, the demand for the 1970s-80s golf course senior communities has significantly decreased. The Boomers are much more likely to spend their recreational time hiking or biking, rather than golfing.
Many middle-income Boomers will remain in their homes, particularly those who have paid off their mortgages. If they have offspring, many of these adult children will take responsibility for their parents’ care, supplemented by home health aides. Those who do not have these options will increasingly rely on Medicare to pay for their 24-hour care when that time comes. There are likely to be increasing federal dollars available for these end care facilities as demand significantly increases.
Ms. Real Estate does agree with your contention, Mr. Developer, but not necessary in your timing. She recommends your getting into the senior housing business (after identifying the type of product and location most likely to be successful in your neck of the woods) the latter part of this decade. By the middle of the next decade, demand will likely begin to surge. In 2025, the oldest Boomers will be 79 and will be more ready to substitute their single family homes in the suburbs for more convenience and freedom.
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