CHICAGO—Many participants at last week's NIC NationalConference on seniors housing in Chicago worried that thenation could be in for a repeat of the 1990s, when commercialdevelopers with little experience in this specialty overbuilt andcaused a glut of supply. Of course, there's no doubt that the UShas an aging population, and in the near future this will spurtremendous demand for new housing that provides special servicesfor seniors. Still, to help avoid the gluts of the past, a group ofexperts convened an afternoon session to show developers how toproperly size up markets and determine the need for the varioustypes of seniors care.

Beth Mace, the chief economist at NIC, began byexplaining the inherent complexity of this sector's demographics.“You don't just need to look at the seniors in the market, you needto pay attention to the adult children because sometimes they arethe decision makers,” she said. Furthermore, seniors deal with awhole range of life issues, and an analysis that gauges the demandfor independent living can't also properly gauge the need forassisted living, skilled nursing care or memory care.

The first and most important step when conducting a marketanalysis is defining the market's area. “If you get this wrong,everything else is wrong,” said Susan B. Brecht,president of Brecht Associates, Inc. aPhiladelphia-based consulting firm. And doing so involves more thandrawing lines on a map. “We never use a radius.” A simplisticapproach like that may cause you to ignore a large number ofpotential competitors just outside those lines that will draw awaypotential clients. Likewise, a simple radius would includedevelopments that are not really competitors because they provideradically different services.