Coming out of the pandemic, investors are enamored with the 55+ or active adult market, but we will see if that enthusiasm turns into overexuberance.
Perhaps the brightest star in seniors housing coming out of the pandemic has been the active adult market, and investors took notice. Census stayed strong relative to the other sectors, and owners tout their lower average move-in age, more approachable rents for residents, lower labor costs and higher operating margins.
As a percentage of seniors housing deals announced, according to our deal database, active adult has grown its share from a paltry 2% in 2019 to 6.4% in 2020 and 8.2% so far in 2021. Plenty of firms have also announced development ambitions in the sector that slightly remind us of those days in 2014 when seemingly everyone inside the industry and out were announcing multi-million or billion-dollar pipelines of brand-new assisted living/memory care communities. That overexuberance had its consequences, for sure.
After Welltower announced its own active adult brand called welltowerLIVING earlier this year, the REIT just doubled down on the sector by creating a new partnership with Treplus Communities to expand their active adult offerings in the Midwest. And other companies like Essex Communities, Livingston Street Capital, and Greystar, to name a few, have big plans in active adult too. Enthusiasm and development activity certainly haven’t come close to worrying levels, and higher construction costs may help dampen the enthusiasm to build in the seniors housing space right now. But we’ll keep an eye on it.
