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.

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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.

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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.

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“You just can't run the numbers,” Brecht adds. A proper,in-depth analysis involves talking to actual people to determinethe quality of care provided by competitors and includes examiningwhether these homes have alliances with respected universities orhospitals. A seniors living development in your targeted area maynot look impressive on paper but have built up a deep loyalty withits residents and their families. “You can't assume because you'renew that you're better.”

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Brecht advises seniors living developers on all types ofprojects, including CCRCs, independent living, assisted living,memory care and others. But always the worst request she gets is,“'just tell me where the hotspots are. Where should I build?'” Todevelopers, hot spots have a high concentration of higher-incomeconsumers and low market penetration. But in seniors living thistype of calculation sometimes does not work. An area can haverelatively few options for seniors but those that do exist haveearned tremendous loyalty from the adult children. And otherregions have what may look like an oversupply on paper, but couplethat with high occupancy rates and long waiting lists.

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Considerations like this are why Mace began the session bysaying that testing markets' feasibility for seniors living “ispart analytics and part art.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.