Mixed–use developments are a well-known concept in commercial real estate. However, incorporating seniors housing into a mixed–use development is somewhat of a new concept that is just starting to gain traction. Senior Housing News defines a mixed-use senior living development as “a senior living community that includes offerings that are open to both residents and members of the surrounding community”1.Mixed–use developments can take the form of a single building, a collection of buildings, or an entire neighborhood and can generally be classified into vertical, horizontal, and master plan communities:
Vertical Mixed-Use Developments combine different uses withinthe same building with public uses such as retail, restaurants or commercial businesses on the lower floors and private uses such as residential units, hotel rooms, or office space on the upper floors.
Horizontal Mixed-Use Developments consist of single-use buildings that are in close proximity to one another or even connected.
Master Plan Developmentscover a large geographic area and contain a host of buildings/public spaces that serve residents and the community in a variety of ways.
There are many reasons why mixed–use senior housing developments are becoming more prevalent,but the main reason is that market forces are starting to encourage them. One of the main catalysts is the mass movement of people to cities and the general desire to live in a more urban environment. Seniors are no exception to this trend. They are eager to be closer to the action where they have more opportunities for engaging social and cultural experiences as well as better access to healthcare. According to the Maplewood Senior Living Chairman and CEO Greg Smith, “The number one reason seniors are gravitating to urban markets is access to healthcare.”2Today’s seniors also prefer to be integrated into the community with people of all ages and not isolated in a suburban environment. They want to live in a community that offers an active lifestyle with more choices and a connection to the outside communitythrough intergenerational interactions. Those demands are increasingly being met by incorporating seniors housing into new mixed–use developments that offer all the amenities, services, and options that seniors want.
The desire for additional amenities outside of those provided in the typical senior housing community has encouraged developers to target locations in urban areas or locations that have exposure to urban amenities. Unfortunately, the availability of developable land in urban locations is normally scarce and the price is often much higher than in suburban locations.Those issues can be mitigated or offset with a mixed–use development that combines multiple uses into a vertical mixed-use building. The economic feasibility of the project is much greater if the cost of the land and building can be split among several parties who will benefit from the location and synergy of uses. The entitlement process is also easier in a mixed–use development because the master developer is typically responsible for the master plan, zoning, and permit and approval processes.
Another benefit of incorporating seniors housing into amixed–use developmentis the communal benefits and synergies between tenants and their stakeholders. Senior living developers no longer have to build or offer every conceivable amenity in their facility to be competitive. Instead, they can focus on their core competencies of hospitality and care and rely on the mixed–use community to provide their residents with the amenities and services they desire2. There is also a real potential for partnerships between tenants especially healthcare providers who are a natural partner to co-locate with senior housing operators. The amenities in a mixed–use development also provide a competitive advantage in marketing to adult children and employees who also benefit from the restaurant, shops, and entertainment.
However, there are alsochallengesand difficulties associated with incorporating senior housing communitiesinto mixed–use developments. First, the intrinsic design of a mixed–use development means there will be multiple groups of stakeholders occupying the same building and public spaces which can make security difficult. To address this concern, master developers need to make sure the various uses of the building are functionally separate during the design phase such that each tenant has complete control of access to their space3. It also likely means the senior housing provider has to limit its points of access and use electronic locks/key fobs so that they can monitor traffic in and out the community. Another important consideration is the ease of access for third parties such as ambulances, healthcare providers, and food and beverage deliveries. These third party providers have to be able to access theproperty for the senior housing community to function and be successful. Developers also need to consider the impact that certain tenants may have on other tenants such as restaurants and bars. Residents do not want their apartment to smell like the restaurant below them nor do they want to hear the sounds of a sports bar or people loitering late at night3. Another challenge of incorporating a senior housing community into a mixed–used development is the higher cost of constructing and operating a senior living community(especially a higher acuity facility)4. Senior housing developers have to compete with luxury multifamily developers for space in a mixed–use development and are often at an inherent disadvantage relative to luxury multifamily developers since senior living providers have to deal with the logistics of running a true operating business.
In summary, there are both costs and benefits to consider when determining whether to incorporate senior housing into a mixed–use development. However, in today’s competitive environment, it would be wise to consider all options because the needs of the future senior housing resident will be fundamentally different than the demands of previous generations.
Andrew Lavinder, Vice President – Real Estate, MidCap Financial Services, LLC