The active adult senior housing sector continues to attract attention, with many large companies heavily investing in this product type. However, despite the promising opportunities it presents, there are challenges that could hinder growth for companies lacking scale, sophistication, and long-term vision.
Adam Cohan, senior director of portfolio management at Greystar Development, highlighted the need for around 50 assets to achieve profitability in this sector, which may discourage some operators from entering the space. Nevertheless, active adult communities are well-positioned to meet the growing demand from the upcoming baby boomer demographic.
Currently, individuals aged 55 to 74 represent a quarter of all renters in the country, with an expected rapid increase of 2.2 million new renters aged 65 and older in the next decade. With nearly 800 active adult communities in the U.S., the sector boasts an average occupancy rate of 93%, reaching 95% for properties open for five years or longer.
As the sector evolves, developers and operators are adapting to meet changing lifestyle preferences and cater to different generations. Multifamily operators entering the active adult space need to understand the unique needs of older residents, as opposed to their usual millennial-focused strategies.
While challenges persist, active adult communities present a defensible property type with lower costs compared to traditional senior housing. With most residents able to afford the rent, the sector is particularly suited for the middle market. Developing a successful active adult community requires a blend of multifamily and senior housing expertise, as well as a deep understanding of the target demographic.
