The retirement community industry prepares as the baby boomers begin to hit 65.
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“[Retirement developers] are building a lot more in Philadelphia, St. Louis, and in Texas,” he says. “Our clients are putting them up all over. The climate is better here [in the South], but some folks just can’t move so you’ve got to have these facilities up north too.”
Yet retirement communities aren’t popping up like mushrooms, and Denise Littlefield, executive director of Germantown Plantation Senior Living, thinks it’s because seniors aren’t buying in as quickly as they used to, despite the growing need.
“There are some communities in East Memphis that are not full,” says Littlefield, whose first job was as a server at Kirby Pines. “Do I think that there’s room for a lot more [construction] in the market? No, I really don’t. There’s quite a bit opening up, and it’s probably 10 times harder to rent an apartment than it was four years ago.”
Littlefield says she thinks some of the studies that previously predicted dramatic growth in retirement housing were based on old numbers that didn’t take the current economic climate into account.
The seven year-old Germantown Plantation actually is full, and a few years ago its investors decided to build a similar community, Silver Creek Senior Living, in Olive Branch. Silver Creek opened two years ago.
“Germantown was very successful,” says Littlefield, who is also operations management consultant for Silver Creek. “The demographics seemed to be very similar to Germantown. But Germantown opened at a different time in the economy so [Silver Creek’s opening] was not what we really thought it was going to be. It is doing well, but it’s a different environment. DeSoto County is a lot more rural, so we’ve had to adjust our expectations and marketing strategy.”
And where she used to have to show an apartment about three times before it rented back in 2008, she said she now has to show it about 30 times.
Burris says seniors are remaining in their homes longer because they know that the housing market is still depressed and that even if they do find a buyer, they may not get as much money if they sell right now. Some may be depending on income from the sale in order to buy into a retirement community.
Littlefield notes that many seniors’ adult children are still laid off from work and spending their time assisting their parents themselves at home.
In some cases, seniors wait so long to move to a retirement community that their health challenges are much more severe and therefore more expensive to treat than if they had moved earlier.
“Our industry is very need-based,” says Littlefield. “You don’t tend to look for it unless you need it. There’s a very short window when people are looking for something.”
The good news for retirement communities is that once residents move in, they tend to stay. Lateral movements from one retirement community to another are not common except when residents require more health services than are currently offered where they live.
In other words, once built, retirement communities tend to stay mostly occupied. But that’s not enough for a construction company to put all of its eggs into one basket, Clark says. At least not yet.
“It’s not good enough of a market where [the retirement industry] is all a company needs, unless it’s a really small outfit, where they can get by doing one or two a year,” Clark says.
But Burris remains optimistic about growth in retirement construction. Noting that retirement communities are long-term projects involving two-to-three years of work on zoning, marketing strategies, and HUD-based financing before construction even begins, he says there’s plenty of time for the economy to turn around.