Active Adult Community Update 2023
After attending the InterFace Active Adult Conference in Dallas this year, we now have much more insight and information to share about this hot new segment of senior living. While this segment is in its infancy with only a 1-2% penetration rate, it’s likely we’ll see exponential growth here due to a few important factors, not the least of which is the substantial demand-side number of baby boomers that are turning 70 years old at a clip of 10,000 per day.
Lifestyle, Lifestyle, Lifestyle: This isn’t a real estate transaction. This is a lifestyle decision, therefore amenities within the community are paramount. Fitness centers with yoga studios, dog parks, pickleball courts, and multipurpose clubhouses are the drivers of this lifestyle for socialization in a carefree manner.
Lease-up Sales: The most resounding difficulty heard at the conference involved sales of the residences - primarily focused on pre-leasing before the building is occupied. For context, the sweet spot for unit total was between 140 - 180 units with generally a 50/50 mix of 1-Bedroom and 2-Bedroom apartments; however, some leaned toward a 40/60 mix. As for the number of touches required during the sales cycle, most operators suggested a 45-day sales cycle with 3-5 touches on average (nearly 10% of the touches required in many life plan communities). Many developers found success with pre-leasing before the building was built, but some operators have opened the building with only 30% occupancy. This places added pressure on sales when selling lifestyle where only a third of the available occupancy is present within the community. The major understanding here is that the Customer Value Proposition is the residents themselves. It’s also part of what extends the average length of stay. The residents have friends and social engagement that keeps them renewing rent contracts.
Operations Intensity: With only 5-7 Full Time Employees (FTE) required to effectively manage a community, operations are minimized. Most communities do not have dining venues or healthcare associated with the community. Operational efficiencies are easier to achieve.
Longer Length of Stay: With an average length of stay between 6-7 years, communities don’t have the pressures on churn or attrition that both multifamily and senior living communities face. Many multifamily communities face a 50% turnover year over year. Of course, the average age of these communities is much less than that of a senior living community. Most communities report an average age between 70 - 72; however, some middle-market active adult communities see average age closer to 77 with a 5-year average length of stay.
Local, Long-time Residents: The community market is often relatively local with 70% of residents coming from a 3-5 mile radius. Many communities report that about 60% of their residents are coming from home ownership within high-end communities. Most investors and developers want to find a location that has 250,000 people that have a higher-than-average income and home values within a 5-mile ring of the development. However, there is a secondary market called the “baby-chasers” - those older adults that are moving to enjoy their grandkids.
Given these dynamics centered around lifestyle and lease-up pressures for Active Adult communities, we confirmed YourTour is a tailor-made solution for these active adult communities to focus on lifestyle and drive occupancy.