Senior housing construction has ramped up in 2019.
According to commercial real estate data from CoStar Group Inc. (Nasdaq: CSGP and Springfield Business Journal research), Springfield has gained 392 senior living units so far this year. And it doesn’t seem to be slowing down.
Developers point to retiring baby boomers and senior housing trends for the increase in construction.
Data from the U.S. Census Bureau show nationwide there are 76.4 million baby boomers – those born between 1946 and 1966. In 2013, the Missouri Census Data Center recorded that 20%-25% of the Greene County population classified as a baby boomer, and the U.S. Census Bureau reported nearly 292,000 people living in Greene County in 2018.
Several senior housing projects in Springfield recently kicked off, like Coryell Collaborative Group’s Monarch 55 and older community, Miller Commerce LLC’s Mission Ridge assisted and independent living facility, and Tera Vera, Phase II, a joint venture between Coryell Collaborative and Miller Commerce. Those projects combined are estimated at more than $35 million.
That’s just the tip of the iceberg. With others ongoing, such as the $30 million Springhouse Village East, a portion of the $100 million Logan Estates Community in Rogersville and Miller Commerce’s $28 million Turners Rock, the senior living investments in the area are mounting to approach $100 million.
The new inventory comes at a time when 2,536 senior housing units are in the market – 26% of which have been built in the last five years, according to CoStar. Broken down by year, the development activity has been sporadic: Almost 30 units in senior living facilities added each in 2015 and 2018, over 200 units 2016 and zero built in 2017, according to CoStar data.
Is there still room?
Sam M. Coryell, president of Coryell Collaborative, said with a large generation beginning to retire, there are enough people with disposable income to meet the current market supply. However, oversupply could be on the horizon.
“In a town like Springfield, us developers need to be mindful of how much supply we’re putting on the market,” Coryell said, noting the company also is working on properties in Arkansas and Kansas. “We’re trying to spread our risk out a little bit by looking in other geographic areas. … There’s a huge demographic, and every year, more and more people retire. I still say there’s room, but we’re being cautious.”
Coryell Collaborative’s senior housing portfolio comprises Coryell Commons, Commons Heights, Veranda Vistas Apartments and Tera Vera.
Matt Miller of Miller Commerce first jumped into the senior housing market in 2008 with The Fremont. The company currently is working on three projects to finish within the next two years: Turners Rock, a community with 51 independent living units, 50 assisted living beds and 20 memory care beds; Mission Ridge, a community with 60 assisted living beds and 57 independent living beds; and the Tera Vera addition of 32 villas for those 55 years of age and older. Miller said he’s planning another housing project in south Springfield, though he declined to disclose details.
CoStar data show the occupancy rate for senior housing in Springfield is about 94%, and around 200 units have been occupied this year. According to an article by AARP, the United States is expected to have more 65-and-older residents than youth under age 18 by 2030.
Miller said he isn’t as concerned with market saturation because aging adults in Springfield require different options, like skilled nursing, assisted living, independent living and a 55 and older community.
“The demographic is super wide, and you’re talking about these lifestyles of someone who still drives, goes on vacation ... all the way up to someone who is completely, 100% dependent on care. So, this market has a very broad range,” he said.
Along with Miller Commerce, Nebraska-based Edgewood REIT owns the real estate for the $20 million-$25 million Mission Ridge project in southwest Springfield, said co-founder and President Jon Strinden.
Over the last eight years, Strinden said Edgewood REIT has invested about $550 million into senior housing to develop around 4,000 units nationally. That’s in 64 senior housing facilities over a multistate area, from Idaho to Minnesota, he said.
“We have seen an increase in vacancy in senior housing properties because there’s been a significant increase in supply,” Strinden said. “What we have seen recently is that it’s starting to level off and demand is catching up to supply. We’re somewhat protected because we’re in tertiary markets. … Most of the issues have been in much larger markets like Chicago or Los Angeles.”
Edgewood REIT’s hand in Mission Ridge is the company’s first in the Springfield market. Strinden said he’d like to take on more work locally, after evaluating how the market responds to the project.
“We feel good about the senior housing market,” Strinden said. “With the baby boomers getting ready to retire, it’s a tremendous tail wind that’s going to continue to drive senior housing activity.”
From a return on investment standpoint, the developers say senior housing fills up much slower than, say, student housing.
“This group is more thoughtful and sometimes have a house to sell, so it takes longer to fill these communities up. But the turnover is lower,” Coryell said.
Coryell said Coryell Commons and Tera Vera are at full capacity, with the newly opened Coryell Commons Heights and Veranda Vistas Apartments beginning to fill up.
Strinden said he tells facility operators to expect to hit stabilization – 90% occupancy – after two years on the market.
“When this demographic ages out and the next generation comes, I don’t know what will happen to these assets, but that’s a long way away. That’s something my kids will have to deal with,” Coryell said, with a laugh.
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