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"New Markets and Niches - Senior Housing"

Originally appeared inNew Mexico Apartment Fax
As mentioned in previous editions of NM Apartment Report, demand for multifamily product is strongest in those properties that are well positioned in a niche of their own. This issue will discuss the Senior Lifestyle Niche, review existing product, and provide an indication of the future success in this arena. To understand the impact on the local economy, one must draw some information from a national level (macro) down to the local community (micro). National Aging Trends At the onset of this century, a mere four percent of the U.S. population lived beyond sixty-five years of age. Life expectancy in 1900 was 49.2 years. Today it is nearly 75 years. Aging of the American population is not a new phenomenon. Our population has been growing older since about 1800. In the year 1800, 50 percent of the population was under the age of 16 and very few people lived to see age 60. Today, some 30% of our population is 50 years and older. Albuquerque Population Growth The graph to the right indicates the growth of each population segment between 1990-2010. Notice that the single largest growth group is 50-59 (for two consecutive decades), and 60-69 (starting next year). Obviously, the baby boomers are getting older, and as their large bulge of population moves through their middle years, demand for senior housing will increase. (in an unrelated note - its interesting to note that the typical apartment dweller (20-29 years old) saw a modest decrease in the last decade, and a 20+/-% increase during the next decade). Although New Mexico is not a primary retirement market like Florida, Arizona, and other states, the largest segment of the population will become seniors, and as such will demand substantially different housing than has been historically available. One signfigant change in this population segment is the large amount of wealth. Not only will the baby-boomers enter this stage of their lives with a large equity in their home, but more than any other generation, the baby boomers have been fervent investors in stocks, bonds, real estate, and other investments, planning for early retirement and a better lifestyle in their golden years. Demand The table on page two indicates the total number of seniors that will be added to the Albuquerque market, but not all of them will be viable candidates for senior lifestyle residences. To determine the ratio of the population that would most likely be attracted to this lifestyle, 1990 was used as a base year for each age group to determine a ratio. Based on the 1990 supply of 1,106 units, the rounded ratio between the number of units and the above age ranges 60+ is 1:208. Based on the total number of residents estimated for 1998, today's market could support 2,129 units (442,944/208), while 1999 can support 2,178 units (453,187/208), and 2000 can support 2,228 (463,440/208). Based on the existing supply, this yields a projected vacancy factor for 1999 of 8.1% Supply In 1990, 1,106 units in 10 separate communities advertised themselves as catering to the senior who desired independent living or assisted living, and by 1998 that number had increased to 2,366 units in 21 separate communities. This chart indicates the number of new senior units added to the market place during the last twenty years: Market research indicates that two additional projects are in preliminary stages - both are located in the SE heights - one is a planned 200 unit low income housing tax credit for the elderly, while the other is a 60 to 80 unit assisted living. Neither has pulled a permit, acquired financing, or acquired the site as of this date. Findings Based on the research, this report indicates the following: Of the 72,974 apartments located in Albuquerque and Rio Rancho, some 3,065 advertise and/or cater to the senior lifestyle, while an additional 3,327 apartments offer independent living, assisted living and/or skilled nursing. These units total 9% of the total supply of available apartments in the marketplace. Approximately 25% of the population located in the Albuquerque MSA is 50+ years in age. Albuquerque is currently witnessing and will continue to witness a strong population growth in 50+ age group, the fastest of any population segment. On average, approximately 50% of the total senior lifestyle product has been developed in the last eight years. The five communities currently in lease-up stage are experiencing an average absorption rate of 10 units per month. Communities that are centrally located are witnessing a faster absorption rate. Besides the five communities that are in lease-up stages, the balance of the communities with a higher than average vacancy factor can be attributed either to functionally obsolete buildings (age and/or condition) or marginal locations. Change in Product I personally visited most of the communities in town that catered to the senior lifestyle. Unlike the historical perception of small units, dark hallways, and a catatonic existence, each of these new comminutes demonstrated exceptional housing and social programs to enhance the senior lifestyle. Four communities stood out as good representatives of the different style of living available: Woodmark at Uptown The most expensive of the bunch, Woodmark has an excellent location, top notch construction, and amenity full programs which allow it to command the highest rents starting at $2,160 for a 400 square foot unit ($5.40/sf). Programs here include educational classes, a dedicated garden area, meals, pets, a baby grand piano, and numerous social/educational programs. Individual units offer home like amenities including ceiling fans, detailed molding, larger closets, pantries, and other qualities that might be found in a luxury home . Village at Alameda Originally designed, build and colocated next to Horizon Health care, this north valley location offers a serene setting in a comfy southwestern ambiance. Rents for a studio unit of 410 sf start at $1,850 ($4.51/sf) and include amenities commonly found in most senior residences: 3 meals a day, transportation, community rooms, cable tv, and social programs. The high occupancy at the Village is a perfect example of tenants favoring a community with a staff that is friendly, and concerned for their needs. Bear Canyon In an age of institutions, mergers, and conglomerations, Bear Canyon is an interesting twist. Run by two on-site couples, the property offers independent living with a down home feeling. Leases are month to month, meals are included, and the focus is on an active lifestyle. Rents start at $1,025 for a small studio ($3.15/sf) and work up from there. Grand Court of Albuquerque The oldest of the newer generation of senior living, Grand Court recently added 60 assisted living units to capture internal tenants that were relocating when they needed additional services. Grand Court was the only community I visited that offered meals around the clock. Rents for one bedroom units of 577 square feet started at $1,298 ($2.25/sf) which explains the high absorption and occupancy rates that this community has witnessed. Although the SE heights location for this community is unusual, it is close to shopping, complies with the old within-5 minutes-of-the-freeway-rule (so the kids will visit), in a secure setting. Definitions For the purposes of this report, the following definitions were used for each of the phases of senior lifestyles: Retirement Living - in Albuquerque is represented by an apartment built in the 1960's or 1970's that preferred senior residents over the general public. Legislation in the 1980's required these communities to establish a 55 years or older policy, or open their doors to all age ranges. Although only a small portion of Albuquerque communities converted to the "55+" status, several communities are recognized as "retirement living" without the designation. These units were originally furnished (no longer) and the rent included utilities (now billed back). Independent Living - A recent addition to this marketplace, independent living is one level above the common apartment unit. Typical independent living communities offered beefed up security, a social director, and concierge services. The resident must be able to completely function on their own. That is, they can manage their own home, including cleaning the residence, preparing own meals, doing laundry, bathing and dressing themselves and remembering to take medication. Typical Age Range 50-59. Assisted Living - This type of residence can provide day-to-day services at an additional cost to the resident. Typical services can include meal preparation or service (from one to three meals per day), help in bathing or showering, additional medical services or on-site home health care, reminders to take medication, housekeeping, laundry, transportation and other services. In New Mexico, Assisted Living requires a state license. Typical Age Range 60-69. Skilled Nursing Facility Care/Alzheimer's Home - A housing option when the resident can not function on his/her own and may require full-time medical and housing services. Most skilled nursing facilities are attached to a hospital, while Alzheimer's homes are often a small percentage of a larger community. Typical Age Range 70+. 5


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by Todd Clarke CCIM (www.nmcomreal.com/nmcomreal)
 
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