An April groundbreaking on a $26 million senior living project at the Metro Health Village campus in Wyoming signals the start of what one developer sees as a $1 billion opportunity.
The project to build a 136-unit, four-story standalone facility just yards from the hospital’s front entrance is part of the first wave of development needed to support aging populations in West Michigan and across the country, said Jason Granger, vice president of development at Granger Group LLC.
Over the next three years, Granger Group expects to develop $1 billion in senior living communities that include a range of assisted living, memory care and skilled nursing components as part of so-called “health care villages” around the country, Granger said.
“We’re anticipating doing $180 to $200 million in senior housing alone this year,” he said. “Senior living over the next 10 to 12 years is going to be very strong for us.”
While the percentage of people age 65 and older has been relatively steady over the last 20 years, it has started to show a very slight increase over the last five years, according to the 2014 Health Check Report from Grand Valley State University that looked at population trends in Kent, Ottawa, Muskegon and Allegan counties.
In the four-county region, there are now more people between the ages of 45 and 64 than there are in the 20-34 age bracket, the report noted. Additionally, in both West Michigan and across the country, there are now more people over age 65 than in the prime working ages of 35-44.
“Demographics are a primary driver (for senior housing) right now,” said Pat Lennon, a real estate attorney with Honigman Miller Schwartz & Cohn LLP in Kalamazoo. “Then there is the cultural trend which has people interested in more services and amenities such as food service and recreation.”
Seniors aren’t just living out their remaining years in exile: They want community and they want to have access to entertainment and lifestyle choices, he said.
According to the Seniors Housing Construction Trends Report 2013 produced jointly by the National Investment Center for the Seniors Housing & Care Industry (NIC) and the American Seniors Housing Association (ASHA), the number of construction starts for both senior housing and senior care units increased year-over-year and is now on par with pre-recession levels.
The recently released report noted that there were a total of 31,462 beds under construction, including independent living, assisted living and nursing care. This is a 24-percent increase from the 25,369 beds identified as being under construction in the 2012 construction trends report.
It takes a village
As health care organizations react to shifting demographics, it’s creating an opportunity for developers like Granger Group.
Given the development prospects in the senior housing market, executives at Granger Group are in the planning stages to launch a separate senior living management company that would work on facilities across the U.S., Granger told MiBiz.
“As we move outside the state, we’re looking at how to manage and maintain the level of quality of these facilities,” he said, noting the new company would remain headquartered in Wyoming. “We want to be the Ritz Carlton of senior living services. … It’s a very strong business opportunity as long as it’s done correctly.”
Granger says the health care village concept the company developed for Metro Health serves as a model for the kind of efficiencies needed to meet the needs of the growing populations of seniors. The development model is meant to be scalable for health care systems large and small and allow residents to “age in place.” Beyond the medical facilities and the hospital, Metro Health Village includes a range of retail shops, the Spartan Stores YMCA, a Hyatt Place Hotel and other amenities.
The company is in the process of working with three separate health care organizations around the country to develop campuses similar to the Metro Health Village concept, Granger said.
“Our business is focused on that market,” he said of the health care village model. “We are taking a first-in-class approach to deliver a quality of life for these residents that allows them to still enjoy life by having them focus on wellness and staying tied into the community.”
A decade of opportunity?
As West Michigan’s population ages, developers of health care and related housing real estate are starting to cater to the growing market. Demand for amenities and a full array of on-site services are driving both nonprofit providers and private developers to spend millions in an effort to attract the region’s retirees and elderly to these health facilities.
The trends toward health care villages and senior housing developments are expected to continue for at least the next decade as even more baby boomers retire, said Lody Zwarensteyn, president of the Alliance for Health in Grand Rapids.
“It’s very simple: The marketplace is responding to what many call the demographic imperatives,” Zwarensteyn said. “As you look around the country, there is a lot of investment happening in this area that’s combining (various) housing options with services and amenities elderly people use more of.”
While Granger Group gears up to capitalize on the national stage, local outfits are also broadening their scope of services and expanding their footprint.
“If you look at the ingredients you need, there is capital to build, a big workforce that can do it and you have buyers — so it’s all there,” Zwarensteyn said.
On top of those trends, Lennon of Honigman said that developers and nonprofit providers can often access development incentives from the Michigan State Housing Development Authority and the U.S. Department of Housing and Urban Development.
“The (senior housing market) has been dormant, but escalated incrementally over the last three years. The multi-family category as a whole has grown quite a bit, but senior housing is growing faster than that,” said Lennon, who is the current chair of the West Michigan region of the Urban Land Institute. “It’s also a growing category for transaction deals and very popular right now.”
Riding the ‘silver wave’
One area builder benefiting from senior housing projects is Holland-based Elzinga & Volkers Inc.
Since 2007, the firm has completed $46.95 million in senior living facilities and it was recently awarded an additional $25 million worth of projects around West Michigan.
“The market as a whole is expected to maintain a fairly balanced supply and demand environment into 2014,” Mike Novakoski, president and CEO of Elzinga & Volkers, said in a statement. “Contrary to this, we have experienced an uptick in the need for the creation, expansion and remodeling of senior living facilities across Michigan.”
One of the newly awarded projects is phase II construction on Waterford Place in Jenison. The company was awarded the project as part of a joint venture with Lansing-based The Christman Co. The firms recently broke ground on the 69,000-square-foot health care addition, which is expected to provide 50 new jobs.
“Senior housing has been a key market for us over the last decade,” said John Parker, vice president of project development for Elzinga & Volkers. “It’s a strong relationship business and most of our clients usually have ongoing construction.”
While Parker said the influx of baby boomers and the “silver wave” driving demand is one very obvious factor in the development landscape, the strengthening housing market has also allowed some seniors to finally sell their homes without a big financial hit and move to the various types of retirement and assisted living facilities.
“Many people are finally ready to sell their homes and in turn they are pre-purchasing units in these facilities and now with some CCRC (continuing care retirement communities) projects returning, they can transition through that system as they get older,” he said. “These facilities are starting to put all the things an aging person might need under one roof.”