Many Retirement Communities Still Await Recovery

Healthy seniors staying put while demand is stronger for assisted-living, dementia units.


Many retirement communities continue to cut prices and offer assistance packages to lure new seniors. While the idyllic lifestyle promoted by many facilities is still a dominant marketing image, they also are pushing the more practical benefits of their communities and trying to find ways to cope with the continued weakness in housing prices. Traditionally, many seniors have financed their move into retirement communities by selling their homes and using the proceeds to pay the often-steep entrance fees at many communities.

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Continuing care retirement communities (CCRCs) offer a full range of services—independent living, assisted living and care for disabled residents, and often dementia care as well. These are often the most expensive facilities for seniors, and they've had to scramble the hardest to cope with the downturn. The National Investment Center for the Seniors Housing & Care Industry (NIC) produces extensive pricing and occupancy reports on communities throughout the country.

In the 31 markets it most closely follows, NIC showed national occupancy of nearly 94 percent for CCRCs in the 2005-2007 period. Even as new construction added to the number of units, demand stayed strong until the market turned in 2008. Since then, average occupancy rates have declined to just under 89 percent nationally. In hard-hit markets, particularly Las Vegas, many properties have numerous vacancies.

These averages mask sharper vacancy problems at some individual facilities. Numerous weaker properties have been taken over in recent years by healthier companies. However, many retirement communities are controlled by religious organizations and nonprofits. They have been more willing to absorb tighter operating margins than investor-financed, for-profit companies.

"The industry didn't suffer as much of a downturn" as other lodging sectors, says Michael Hargrave, an NIC vice president who oversees its industry data reports. A growing number of seniors are sharing homes with adult children who often are unemployed, he observes. As the economy recovers and those children find jobs, their improving economic conditions will support the move of seniors into retirement communities. Other seniors may finally be able to sell their homes at prices that allow them to make the move into retirement complexes as well.

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"What seniors can afford today is different than what they could afford three or four years ago," Hargrave says. "You've had some retirement communities that have gone out of their way to make adjustments to their entry fees and prices." Their price structures have become more aligned with the home values in their markets.

LeadingAge (which recently changed its name from the American Association of Homes and Services for the Aging) has more than 1,150 CCRC sites in its membership. "We recently did an informal poll of our members and found a number of them with entrance fees below $200,000 and many below $100,000," a spokeswoman says. "These communities are all over the country, but often in the South and Midwest. This option may require going to a studio or one-bedroom apartment, but it also shows that retirement communities are a more affordable option for middle class older adults."

While CCRCs and independent living communities have had trouble attracting healthy seniors who can afford their units, the market for serving disabled seniors has not been so sharply affected.

"The independent market was always driven from a lifestyle choice," says Dwayne Clark, the founder and CEO of Aegis Living in Redmond, Wash. Aegis owns or manages some 35 retirement properties in several western states, and focuses heavily on high-needs seniors who require extensive living assistance.

When real estate markets seized up and healthy seniors had trouble financing their move into CCRCs, Clark says, they, in effect, said: "'I can postpone that lifestyle need.' So I think some of those buildings out there are ill-equipped to deal with this phenomenon. It's going to be hard going for people who are only independent providers in the next two or three years."

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Clark says he believes many seniors who have skipped the independent phase of the senior housing continuum are encountering physical and mental infirmities that are causing them and their families to enter facilities such as those Aegis Living operates. "It's the reason we've always focused on assisted living and dementia care," he explains. "It has less volatility" in demand.

For example, he notes, Las Vegas has some of the highest CCRC vacancy rates in the country. "There's no wealth there," Clark says. "It's a very low-income city." Yet Aegis Living's only total-dementia facility is in Las Vegas, "and it's 100-percent occupied."

Also, while Clark understands the need to emphasize affordability, he notes that his properties tend to be among the most expensive in the industry. The adult children of ailing parents are seeking the best quality solution for their parents, not necessarily the cheapest.

That includes him. Clark's mother, who passed away last fall, lived in one of his communities for seven years and suffered from Alzheimer's. "I don't know that you want to negotiate to find the cheapest place to put your mom," he says. "We're a value proposition ... We sell only one thing, and that's peace of mind. We're selling to the 52-year-old daughter who is coming here praying that she can find a place for her 83-year-old mother, whom she dearly loves."

Twitter: @PhilMoeller