The nation’s 76 million Baby Boomers and their aging parents are changing the face of the senior care industry in Kentucky and across the country, particularly when it comes to senior living communities. They are demanding more units, more amenities and more community.
The dozens of new developments set to come on line in the coming years in the Bluegrass State won’t be your grandparents’ old-folks home. The senior living communities being built today are more like hotels or cruise ships, incorporating bars, sit-down restaurants, classrooms, movie theaters, commercial teaching kitchens, music rooms, indoor-outdoor spaces with fire pits and lots of seating and gardens with walking paths. The only limit to what you can get is what you can pay.
The new communities being developed today reflect the demands of a growing market of active seniors who aren’t interested in giving up their homes to move somewhere just to grow old.
Some of the fanciest new facilities “are kind of like a cruise ship on land,” said Bob White, executive director of the Kentucky Assisted Living Facilities Association. “It depends on the age of it, and the pricing.”
Kentucky has not generally been considered one of the major markets for senior living facility construction. The biggest markets for the estimated $350 billion-plus industry are Texas, the Southwest, the Northwest, Northeastern cities like Boston and Philadelphia, and Chicago.
But the commonwealth’s demographic trends are undeniable. Between 2000 and 2010, the median age of Kentuckians increased from 35.9 to 38.1, and the number of people over age 80 – the average age at which seniors move into senior living facilities – increased by more than 20,000 to 147,521, according to figures from the Kentucky State Data Center at the University of Louisville. In the past five years, the over-80 population in Kentucky was projected to have increased by another 12,000.
By 2025, about when the first Baby Boomers will become octogenarians, the over-80 population in Kentucky is projected to be nearly 200,000, an increase of 33 percent. By 2045, when most boomers will be over 80, Kentucky’s 80-plus population is projected to be more than 339,000 and its median age will be over 40.
Facility numbers rising steadily
There is evidence in Kentucky of senior living development ramping up to meet demand. According to the Department for Aging and Independent Living, which is part of the Cabinet for Health and Family Services and which certifies assisted living facilities in the state, four assisted living facilities opened in 2015. Two months into 2016, a CHFS spokesperson said nine new facilities are already pending.
The state has 113 open assisted living facilities, 17 of which provide memory care. With an average development size, according to White, of about 40 units per facility, that equals 4,500 assisted living units in the commonwealth.
Beth Burnham Mace, chief economist at the National Investment Center for Seniors Housing and Care in Annapolis, Md., said in 2015 the Louisville metro area saw 10 percent growth in the number of new assisted living units. NIC uses a larger average facility size – 100 units – so that’s 200 units, or the equivalent of two properties by NIC’s calculation. Louisville’s five-year growth rate was 32 percent, or 513 units. Nationally, in the 31 largest primary markets tracked by NIC, the one-year growth rate was nearly 8,200 units, or about 4 percent; 15 percent over five years and 26 percent over 10 years. Mace said NIC didn’t have figures going back 10 years for Louisville.
Certainly not all of Kentucky’s over-80 seniors will be living in senior living communities. Ralph Bellande, chief executive and president of Renaissance Senior Communities in Louisville, said the vast majority of seniors live in homes, condominiums or apartments. Only between 6 percent and 7 percent live in assisted living facilities. The reason is simple: “People want to stay at home,” he said.
Anyone who’s ever had a conversation with an older parent about moving out of a longtime residence and into an assisted living facility knows the issue isn’t as simple as the parent being physically unable to live alone. The perceived loss of independence can be a major obstacle. Often, seniors have lived in their homes for decades and can’t imagine moving.
Home health expanding also
Increasingly, they don’t have to. The senior home healthcare industry is expanding along with the aging population just like the number of senior living developments. Importantly, Medicare covers in-home healthcare for seniors, provided they meet certain conditions such as being under the care of a doctor, being home-bound or dependent on using a wheelchair or walker to leave, and the agency providing the care is Medicare-certified. Medicare does not cover the costs of assisted living.
Bellande said the growth of the in-home care industry is one factor that could affect demand for space in assisted living facilities in the future. Another is the health of the real estate market. Since Medicare does not cover the cost of assisted living, seniors quite often have to sell their homes in order to have the $2,200 to $6,000 a month needed to live in a senior community.
Mace said while in-home care services could be seen as a competitor to assisted living facilities, a number of companies that offer assisted living also offer in-home care services as an extension of their properties.
Sometimes disabled seniors can become isolated and depressed in their homes as they increasingly lose their independence, said Brian Durbin, president of independent and assisted living provider Arcadia Communities. The challenge for their children, he said, is convincing them that they cannot do the things they used to do, but that there are options available. At that point, moving into a senior living community with a variety of amenities designed to promote social engagement can be like a re-set for their systems.
“People come into our communities and they eat better, get more exercise, talk to people who’ve been through the same things recently,” Durbin said.
Arcadia’s Elizabethtown location,
RobinBrooke Senior Living, boasts a community baking kitchen and art studio, a fitness center, a library and Internet lounge, a theater room, a happy-hour lounge, a poker parlor, a restaurant with indoor and outdoor seating, and gardens with walking paths.
“From a design standpoint, there’s been a battle to see what are the next great things we can bring to these communities,” Durbin said. “Right now Boomers are making the decisions for their parents. The facility designs are flexible so when they (the Boomers) are ready it will appeal to them.”
Competition means more amenities
Durbin said while RobinBrooke is currently his company’s only Kentucky development, Arcadia is in the process of acquiring property for two more facilities in the state. The firm is one of the smaller players, with five communities in Michigan, Kentucky and Louisiana. However, small players like Arcadia dominate the senior living industry.
According to the U.S. Small Business Administration, as recently as five years ago the top four senior living firms – Brookdale Senior Living Inc., Sunrise Senior Living Inc., Emeritus Corp. and Atria Senior Living Group – controlled just 13 percent of the market share. The SBA said all that competition is fostered by low barriers to entry for the industry, which leads to tight profit margins.
Arcadia, however, is expanding. Some of the newest ideas it is looking at include an art theater combined with a baking kitchen, a music room and an indoor/outdoor dining concept with fire pits and rose gardens connected by walking paths.
“Many of our residents grew up loving art and cooking,” Durbin said. “We’re trying to create some lifestyle amenities where they can continue to do that.”
The amenities in today’s senior communities are designed to promote interaction and wellness, Mace said, with an emphasis on getting people out and socially engaged. She calls it the “wow factor,” and she says it’s geared to appeal to adult women, who are most often the children working with their parents on the decision to move to a senior development.
Other trends in construction include locating facilities close to dense urban areas for easier access to entertainment and activities and devoting more space to wellness programs and rehabilitation and exercise areas.
Nationally, Mace said, some concerns have begun to surface about overbuilding in certain markets like Texas, which has some of the lowest barriers to entry of any state when it comes to building and running senior living facilities.
Mace said overall construction costs have been on the rise mostly due to higher labor costs because subcontractors in growing markets are busy working on other residential and commercial projects. The change in facility designs to accommodate new amenities doesn’t have nearly the effect on the budget as labor costs.
Highest demand 10 years off
Despite the concerns about overbuilding, higher construction costs and the fact that the real bulge in demand won’t appear for another 10 years, construction is happening and financing for new senior living developments is relatively easy to get.
KALFA’s White said it costs between $75,000 and $80,000 per unit to build senior developments. “Lots of bankers out there specialize in senior housing, and provide financing or refinancing,” White said.
It takes 12 to 18 months following the completion of a project to achieve 95 percent occupancy, he said, and his best guess is that Kentucky’s vacancy rate is around 8 percent. Think about it this way: Right now, according to the Kentucky State Data Center, there are roughly 147,500 Kentuckians over the age of 80. If Bellande is right and roughly 6 percent of them could make up the market for senior living facilities, that’s nearly 8,900 people. With roughly 4,500 units, Kentucky has about half the number of units it needs to satisfy potential demand today. Even adding another nine facilities – or about 3,600 units – won’t eat in to demand too much.
Price and the ability to sell one’s home are two key factors that can keep people out of senior communities. When it comes to finding a facility, price equals amenities. At the lower end of the price range, White said, $2,500 a month buys a room and minimal amenities. At the $6,000-a-month end of the scale, a senior patio home or apartment comes with evening happy hours in the bar, a theater, a concierge – basically all the new trendy things.
“It never ceases to amaze me what people will pay,” White said.
Another trend Mace said she has seen is some developers building facilities with, say, a bathroom shared between two independent rooms as a way to reduce costs. With many more people in different income brackets about to need senior facilities, developers, it seems, are trying to build something for everyone.