Senior housing has been in trouble since the coronavirus made it too risky for people to stay in nursing homes and other senior facilities, particularly before the vaccine was developed. But a new $1 billion venture by Clearwater Living and Berkshire Realty Ventures to develop and acquire senior living assets shows there might be a renewed interest moving forward for senior living facilities.
Clearwater Living and Berkshire Realty Ventures will work together to acquire and develop senior living facilities in the western United States. Development is slated for two California Windsor locations: Newport Beach and Glendora specifically. And more development is slated to happen at other high-end senior living facilities like those; high-end is defined as having large unit sizes and adequate common space for residents.
The investment team
Clearwater and Berkshire have teamed up before, in 2016, on a fund for senior housing. The result was the building of four Clearwater communities: Sonoma Hills (California), Rancharrah (Nevada), Riverpark (California), and North Tustin (California).
Although the number of residents living in senior housing facilities reached historic lows in 2020, the demand for senior living facilities has recently started to rise. John Reinsma, managing director at Confluent Senior Living, told Multi-Housing News, "Move-ins into senior living communities between March and June [reached] the highest rates we've ever experienced in our history."
Although we're seeing a recovery in the senior housing sector, there are still challenges, says Reinsma. One challenge is the industry hasn't yet completely stabilized from the effects of the pandemic. For example, senior living projects stopped being built. But the result of that has led to pent-up demand, which is breathing life back to the industry.
Players in the senior housing space have learned something through the pandemic: the importance of providing healthy spaces for the residents. This is done in a couple of main ways.
- Better design for senior housing so residents can have improved mental health and comfort. This is achieved by adding more outdoor space for dining and relaxation and more recreational space.
- New technology needs to be incorporated as well, such as using UVC light to help reduce the spread of airborne viruses and installing upgraded HVAC systems. Telehealth, or telemedicine -- care from a doctor via computer or smartphone without needing an in-person visit -- along with resident monitoring and wellness checks, will also be part of the plans.
The Millionacres bottom line
Investors and developers in the senior housing space are for the most part "cautiously optimistic," said Mel Gamzon of Senior Housing Global Advisors. The road to get back on track, he added, isn't a "cakewalk."
But when you consider the potential market for senior housing, as long as these test cases prove to be winning models, you've probably got a winner on your hands. The 85-plus population is expected to increase a staggering 177% over the next 30 years, and that group will likely fuel the demand for senior housing -- which could be good news for commercial real estate investors.