Active Adult: Moving Upstream to Attract the Younger ConsumerConsiderations for nonprofit and

for-profit senior living providers

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 1

Active Adult: Moving Upstream to Attract the Younger ConsumerConsiderations for nonprofit and for-profit senior living providers

As healthcare acuity continues to rise among assisted living and independent living

residents, savvy providers are finding ways to expand their reach across the care

continuum. While this often means branching out into services such as in-home care and

insurance products, increasingly providers are opting to stick to the business of service-

enhanced real estate. The difference is a new focus on enticing the younger segment of

older adults—with an active adult strategy.

Providers—particularly nonprofits—who offer assisted and independent living but choose

not to pursue an active living and hospitality expansion may miss the boat. According to

the 2019 State of Senior Living Survey conducted by Perkins Eastman, about 80% of the

providers who responded to the national survey think “technology, products and services

that allow consumers to be autonomous and proactive in their care will have the most

impact on the senior living market.” Active adult communities are an attractive option to

provide that autonomous, wellness-centered environment by focusing on lifestyle over

health care.

With benefits to both the residents and the bottom line, active adult lifestyle offerings are

likely the way of the future. This white paper will discuss the considerations around adding

a business line focused on life enrichment for younger seniors, rather than the traditional

healthcare model.

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 2

Strategic planning and active adult housingWhat is the building type and who owns it?

Bringing an active adult lifestyle offering into

nonprofits’ strategic planning conversations is

important for the future of these organizations,

particularly if they want to compete with for-

profit developers that are pursuing this market.

“I’m surprised by how long it has taken the

industry to realize it is selling two different

things: care and also lifestyle,” says Vernon

Feather, principal for Roanoke, Va.-based SFCS

Architects. “I think for most nonprofits, when

they began, their mission was about care. It

has taken a while, but they have been able

to reinvent and consider what is the lifestyle

advantage they are providing.”

The clinical mindset still drives many providers’

business philosophy, but it’s not the right kind

of message to attract younger older adults

into active adult communities. With this pivot,

providers should commit to the idea that this

product will not be part of their healthcare

business — it will become a new life enrichment

business.

What is active adult?

By appealing to a much younger target

audience—one that is 55 and older—active

adult housing typically:

• Does not offer a healthcare component

• Does not offer a dining component

• Provides freestanding or condo-like

units with floor plans that offer multiple

bedrooms, dens, and kitchens

• Offers low-maintenance outdoor space

• Has a limited common area that can be

used for gatherings and events

• Employs significantly fewer full-time

staff than traditional senior housing

Yet given these differences, providers have

a major opportunity to simultaneously

capitalize on their expertise in housing,

capture a brand-new consumer audience

who is 55 to 75 years of age, and begin

developing a relationship with consumers

well before they have care needs that signal

a move to senior living.

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 3

While some nonprofits might argue that active adult communities may not align with their

mission, findings from the more than 80-year-long Harvard Study of Adult Development

suggests otherwise. Providing a community that helps cultivate and nurture fulfilling

relationships, which is a focus among active adult communities, would lend itself well

to the mission of many nonprofits. The researchers argue that strong, secure, fulfilling

relationships help “protect people from life’s discontents, help to delay mental and physical

decline, and are better predictors of long and happy lives than social class, IQ, or even

genes.” Because of these positive effects, it’s possible that an active adult environment may

in fact improve residents’ long-term health and quality of life.

Additionally, a move into the active adult market can offer:

• More options for more consumers. These options might include condos and rental

apartments, single-family homes, duplexes, and other formats.

• Various price points and pricing models. These can appeal to a wider array of

individuals: ownership or rentals versus the traditional entry-fee model that is common

in CCRCs.

• Access to the home- and community-based care (HCBC) market. Providing an “IL

light” option can expand this access.

• A middle-market solution. The ability to provide an option for middle-income seniors

who cannot afford the traditional nonprofit CCRC.

• New business channels. A prospective avenue into home care can be provided to

residents of the active adult homes.

The opportunities are vast, but there are many nuances to evaluating this opportunity,

especially since many nonprofits considering active adult will need to make drastic changes

to their business models in order to pursue this market effectively.

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 4

Preparing for the shift

Before considering changes or repositioning during the strategic planning process,

providers must assess their core philosophies with respect to the consumers they wish to

attract today and the future envisioned for the organization.

When it comes to future planning, this means thinking about a new approach and

considering whether they have the ability to pivot accordingly. For some, this will mean

redefining the organization’s vision and traditional building type. Many organizations wait

too long to have this conversation about change and miss the required questions they need

to ask about their strengths, weaknesses, and priorities for the next five to 10 years.

“Offering ownership of the asset may be a sticking point to some nonprofit providers,

but you don’t have to own the asset and take on a huge debt as a result,” says Dana

Wollschlager, partner and practice leader for Plante Moran Living Forward. “The role of the

provider in active adult is to give support to the community and to facilitate socialization

and the lifestyle the residents want.”

Rental Own% of Total Construction

2009 2010 2011 2012 2013 20152014 2016 2017

Age-Restricted Multifamily Units

Construction Completed

30

25

20

15

10

5

14%

12%

10%

8%

6%

4%

2%

0%

Nu

mb

er o

f Un

its

(in

th

ou

san

ds)

% o

f all

Mu

ltif

amily

Co

nst

ruct

ion

Co

mp

lete

d

Source: U.S. Census Bureau Characteristics of New Housing for Multifamily Units by Age Restriction

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 5

Because active adult housing competes with non-age

restricted housing such as condos, co-ops, multifamily

housing, and apartments, these properties should be

examined during market feasibility studies. The graph

on page 4 indicates the positive trend of completed

construction for age-restricted multifamily units across

the country from 2009 to 2017, indicating the growth

and demand is there. This is supported by the fact

that the 2017 American Housing Survey shows a 17%

increase in the share of participants living in an age-

restricted community from 2015.

Also consider that the decision-making process is different from a move to senior housing

because a prospective resident might already live in a comparable housing product such

as multifamily. Vacancy rates have been consistently decreasing since 2009, as illustrated

in the chart above, which supports the increase in construction of age-restricted units.

While not every prospective resident will be willing to move into an active adult product,

decreasing vacancy rates support the idea that there is demand for more product.

2009 2010 2011 2012 2013 20152014 2016 2017 2018

12%

10%

8%

6%

4%

2%

0%

U.S. Rental and Homeowner Vacancy Rates

Rental Vacancy

Homeowner

Vacancy

Source: U.S. Census Bureau Housing Vacancies and Homeownership

17% increase

According to

participants in a 2017

survey, there was a

17% increase in those

living in age-restricted

communities

Source: 2017 American Housing Survey

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 6

The lifestyle behind active adult living What programming does active adult offer?

For those embarking on an active adult expansion, the amenities and programming must be

radically different from what is offered

in current senior living. Activities and

amenities that appeal to an assisted

living resident, for example, likely

will not align with the aspirations of

someone moving into active adult

housing. A decision as simple as

providing a bar with alcohol can make a

vast difference, Feather says.

“Many nonprofits have resisted offering

alcohol, but it’s such a social driver,” he

says. “Old communities were designed

around the sedentary idea that

everyone is going there to relax. There’s

not a lot going on. The focus now has to

be that there is a lot going on. Wellness

is front and center.” It can be argued

that providing this type of setting will

actually help longevity of residents,

given that a study out of Brigham Young

University shows that “having social

ties with friends, family, neighbors, and

colleagues can improve our odds of

survival by 50 percent.” It argues that

low social interaction is as harmful as

alcoholism and smoking so, if health

issues were a concern, providing spaces

that encourage social interaction would

actually help residents.

Garden Spot Village and the Lifestyle Approach

For Garden Spot Village, a nonprofit CCRC

in New Holland, Penn., lifestyle has always

been a key component of planning. Today the

community is 99.8% occupied with an age range

starting with residents in their late-50s and

spanning four generations.

At the heart of Garden Spot Village is variety;

the community has 569 houses and apartments

and is in the process of adding 50 more.

Apartments range from studios with kitchens

and laundry to three-bedroom units that are

up to 2,000 square feet. Additionally, Garden

Spot offers clustered cottages that marketing

director Scott Miller says are the most popular

offering at the moment.

“Lifestyle is the basis of all of our messaging,”

Miller says. “The value proposition is that we

provide abundant opportunities for people to

live with purpose in the community.”

The community has 40 clubs, from an art guild

to a train room, quilters, crafters, and even a

metalworking club launched by residents.

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 7

Providers should evaluate amenities and unit features based on operational and

maintenance costs, space needs, lifestyle alignment, ability to encourage social

engagement, and location. They might include:

• A social gathering space in a common area of the community such as a pub or bar

• An aerobics or activity room with frosted glass in the front of the community

• A focus on the outdoors including outdoor spaces with fireplaces

• Underground parking

• Apartments with views and many windows

• Classrooms and lifelong learning rooms where special interest groups can gather

In addition to developing specific building spaces to entice consumers, providers can also

look to partner with concierge service providers who make carrying out everyday tasks

easier. Coordinating access concierge laundry and dry cleaning services, Uber and Lyft

ridesharing services to and from social events, concierge dog walking or boarding services,

and meal delivery services make sense if they align with the lifestyle promises of the

community.

It’s important to offer a variety of amenities and services, but not so many that the lifestyle

component becomes too costly.

“People can receive nearly anything offered in a retirement community in their own home:

meal delivery, healthcare services, housekeeping, and medication delivery to name a few,”

Wollschlager says. “The one thing they can’t get is the social companionship. Providers

can generate a unique lifestyle, but they will need to learn how to market that to future

residents.”

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 8

Marketing to the active adult residentDeveloping an entirely new message

Because active adult living is based on lifestyle and not health care, organizations that

offer it must develop a new marketing strategy to appeal to this new audience. Largely,

this audience comprises baby boomers, who today are 56 to 76 years of age and have

a completely different outlook on retirement than their counterparts from previous

generations.

“Previous generations saw retirement as a reward for a lifetime of hard work,” says Scott

Miller, director of marketing for Garden Spot Village in New Holland, Penn. “Baby boomers

say, ‘I am still changing the world.’” As a result, the community focuses its messaging on

lifestyle rather than age.

Using digital media with imagery that is

authentic and taken from the community and

actual residents is key.

Using real photography, rather than stock

images, is a place to start, says Hoppy Sell,

president of Gastonia, N.C.-based Spectrum

Consultants.

“Any of us can buy photography or use models

to portray younger adults,” Sell says. “But it’s

not about using stock images. It’s about using

your own residents and showing them doing

[things in the community].”

Marketing also becomes critically important because those who are moving into active

adult are doing so based on wants, rather than needs. The decision is consumer-driven,

rather than health-care-driven, and this requires a mindset shift for marketers, across

various channels including social media.

Scott Miller

Director of MarketingGarden Spot Village

“ Previous generations saw retirement as a reward for a lifetime of hard work. Baby boomers say, ‘I am still changing the world.’” As a result, the community focuses its messaging on lifestyle rather than age.”

ACTIVE ADULT: MOVING UPSTREAM TO ATTRACT THE YOUNGER CONSUMER 9

“The most important thing is the materials and

marketing collateral—regardless of print, video,

social media, email, TV, billboards, or whatever

it may be—authentically represents the culture

and lifestyle people are stepping into,” Miller

says.

Expanding into active adult: doing the research

A move into active adult living may seem like

a departure from traditional senior housing

models, and not all operators will make the shift.

However, competition and consumer demand

may require it. Beginning to think about this

expansion today will allow providers to create

offerings for a younger demographic that seeks

a housing option that offers a social, active

lifestyle in a variety of home styles. Appealing

to this active adult market now can not only

help operators expand their target resident

demographic, but can be the difference between

remaining competitive in the future and being

left behind.

Property Type Monthly Rent Annual Rent% Spent on

Housing

Annual

ExpenseAnnual Income Shortfall

Median

Retirement

Savings3

Years Until

Assets

Depleted

Active Adult1 $1,603 $19,000 60% $32,000 $30,000 $2,000 $105,000 52.5

Market Rate

IL2$3,257 $39,000 60% $65,000 $30,000 $35,000 $105,000 3

Active adult and the middle market crisis

The “middle market” for senior housing

is a rising concern among consumers and

operators alike. The vast majority of pre-

retirees cannot afford today’s average

assisted living costs, and there have been

many ideas proposed with respect to

meeting the needs of the massive baby

boomer population. (Read more about

this challenge in Plante Moran Living

Forward’s white paper, Solving the Senior

Housing Middle-Market Crisis.)

Under the active adult housing model

providers can help aging middle-income

seniors age in the right place and extend

their savings. As evidenced by the chart

below, the units priced as active adult

would allow the average individual to live

in the dwelling without depleting all of

their assets. (See chart)

1 Monthly rents are averages of starting rents at over 30 active adult communities nationwide2 Per NIC MAP Data Service — Market Rate Indepentent Living rents are based on IL rents in the NIC Market Performance Report for 1Q20193 The Urban Institute, DYNASIM3

Jamie Timoteo, Senior Vice President

Phone: 312.344.2449 | Email: jamie.timoteo@plantemoran.com

Miranda Eliason, Senior Consultant

Phone: 312.980.3318 | Email: miranda.eliason@plantemoran.com

Plante Moran Living ForwardTM provides fully integrated

strategic, financial, operational, and development advisory

services by a single team that has spent decades finding

solutions that increase the quality and places of care for seniors.

Plante Moran Living Forward

10 S. Riverside Plaza, 9th Floor, Chicago, IL 60606

pmlivingforward.com | @pmlivingforward

Dana Wollschlager, Partner and Practice Leader

Phone: 847.628.8903 | Email: dana.wollschlager@plantemoran.com