CHICAGO—Developers and investors in market-rate rental housing have been on a remarkable run over the past few years, and as they look toward 2017, many plan to diversify into new housing for seniors. That sector has also been on an upswing, and demographic trends point toward continuing expansion.

Officials from the Chicago-based global market research company Euromonitor International told GlobeSt.com that the number of US facilities devoted to seniors will increase from roughly 26,000 today to about 30,600 by 2021, an annual growth rate of 3.1%. And the National Investment Center said that at the end of 2015, US developers had 48,903 units for seniors under construction, more than double the number under construction three years earlier.

“The senior living sector holds tremendous potential for growth and profitability,” said Waterton chief executive officer David Schwartz. “While the wants, needs and lifestyles of this age cohort are very different from those of a typical renter, from an operations standpoint, there are a lot of synergies between the two sectors, making senior housing a natural extension of our core business.”

In 2015, Waterton, which owns and operates a portfolio of nearly 20,000 apartments and 13 hotels across the country, acquired a 50% interest in Chicago-based senior housing developer and operator Pathway Senior Living, marking the firm's first foray into senior housing.

As some firms invest in existing entities, others have already launched their own senior divisions. Chicago-based CA Ventures, for example, which recently started a number significant student housing and apartment development projects, including a 26-story tower in Chicago's South Loop, formed CA Senior Living in 2012 and opened its first senior community last summer. It also recently entered into a joint venture with a Goldman, Sachs & Co. affiliate to develop 14 senior housing communities across the US. “With capital pouring into the sector, it's important to move quickly and strategically to grow market share,” said John Dempsey, principal of CA Senior Living.

This diversification was very evident at the National Investment Center for Seniors Housing & Care Fall Conference in Washington, DC, according to Steve Rappin, president of Evergreen Real Estate Group, a Chicago-based developer of affordable and market-rate rental communities, including assisted living and memory care facilities for seniors. At one of the sessions, a panelist asked who in the audience was new to the sector, “and more than half of the people in the room raised their hands,” he told GlobeSt.com. And six or seven years ago, this conference attracted about one-fourth the number of participants it does these days.

Evergreen always partners up with an experienced operator whenever it develops housing for seniors, and Rappin strongly advises anyone new in the sector to do likewise. “I think it's mandatory,” especially as it's well known that a lot of failed projects were launched by inexperienced developers during the 1990's boom. “An experienced operator is really the linchpin that lenders are looking for.”

And developers that don't heed this advice will probably create a new crop of troubled communities. In fact, Rappin expects that once the current boom in senior housing subsides, those with suitable experience will buy up these distressed properties and launch renovations.

But he does not expect any decline in 2017. “It seems like we are still in the seventh inning. I think there is a bit of runway left.”

Instant Insights /

Multifamily Developers Eye Housing for Seniors

Related Stories

Recommended For You