Shawn James O’Connor
Senior director, Valuation & Advisory | Senior Housing/Healthcare Industry Group, Cushman & Wakefield
In 2018 there were 754,000 residents aged 65 and older in Colorado, who comprised 13.4% of the total population. This is below the national average of 15.3%. The baby boomer generation includes all people born between 1946 and 1964. Boomers are now between 55 and 73 years of age. A decade from now, when all the boomers will be 65 and older, they will comprise over 18% of the total population. This projection does not account for the seniors migrating to the state for a better quality of life or to be closer to their adult children. If these residents are included, this figure would likely be even higher. According to the Colorado State Demography Office, Colorado’s growth in its 65-plus population was third fastest in the United States between 2010 and 2015. During this period, the 65 and older population increased by 29%. The anticipation of seniors relocating to Colorado was a driving force behind the recent seniors housing construction boom.
The National Investment Center for Seniors Housing and Care reported there are 1,588 seniors housing units currently under construction in the Denver region. This represents 10.2% of the existing inventory as of first-quarter 2019. This is higher than the 6.7% average among the primary markets NIC tracks quarterly. These primary markets are made up made up of 31 of the largest core-based statistical areas in the United States, of which Denver is the 19th largest. The baby boomers have made a major impact on the local and national seniors housing market. Boomer retirement expectations are quite different from the previous greatest and silent generations. Having invented the idea of mass customization, they want a range of services, amenities and unit sizes with the option to add features of their choice. Developers, investors, architects and interior designers have taken notice.
There are several notable projects under construction. The Ridge Pinehurst in Lakewood is the largest. Located at South Wadsworth Boulevard and West Quincy Avenue, the 15-acre site overlooks the Pinehurst Golf Course and has views of the Rocky Mountains and downtown Denver. When completed in late 2019, the development will add 222 independent living units, 96 assisted living units and 42 memory care units. Amenities will include a lap and resistance pool, a wine room, indoor and outdoor pickleball courts, outdoor fire pits, theaters, an art studio, a wellness center and multiple dining venues. The reported construction cost is approximately $150 million. This will be Utah-based The Ridge Senior Living’s first venture outside of its home state.
Another large project is Atria Englewood. Located on Clarkson Street between Swedish Medical Center and Highway 285, the seven-story, 130-unit facility also is expected to be completed this fall. Located in an older and demographically desirable submarket, it has high barriers of entry due to the availability of suitable land. The development will contain 106 assisted living units and 24 memory care units. Amenities will include a rooftop terrace with firepits and a “sky lounge” with mountain views. Unlike traditionally designed assisted living communities, Atria Englewood will offer units up to 1,200 square feet that will feature full kitchens along with in-unit washers and dryers. The reported construction cost is approximately $90 million. The developer is Chicago-based CA Senior Living.
Despite declining occupancy rates for assisted living, as well as increasing construction costs as a result of labor shortages and higher prices of building materials, there is still a great deal of new construction. According to NIC, there are 1,036 assisted living units under construction in the Denver area. This includes assisted living memory care units. The highest construction versus existing assisted living inventory volume is in Adams County at 64.8% followed by Arapahoe County at 20.8% and Jefferson County at 13.0%. Independent living occupancy rates among stabilized properties in the region have remained relatively stable at 90% as the market absorbed 993 new units over the last four years. There are currently 552 independent living units under construction in the Denver region. Denver County has the highest volume of independent living construction versus existing inventory volume at 17.8% followed by Jefferson County at 13.0%.
The healthy housing market has been the strongest driving force behind this surge in development. Strong occupancy and healthy rent increases for seniors housing are reflective of the prospective residents being able to sell their homes quickly. However, there are signs the region’s single-family housing market is slowing down In March, the Denver Metro Association of Realtors reported that the area’s median home price had declined on a year-to-year basis for the first time since 2012. As a result, several proposed projects have been postponed. It appears that developers and investors are willing to wait until new construction supply is absorbed and seniors housing occupancy increases before starting their projects.
A cautious lending environment, rising construction costs, labor shortage and economic uncertainty also will contribute to fewer construction starts. On a brighter note, the upcoming slowdown is good news to operators who have struggled to fill units as new supply entered the market.
