Senior developments are one of 'the darlings of the real estate industry.'
High on a bluff overlooking the Mississippi River and I-35E, a construction crew toils away on a 120 unit senior housing community being built by Southview Senior Living and developer John Wall.
Although located in the tiny town of Lilydale, the development takes place in one of the hot spots for senior housing in the Twin Cities -- Dakota County. Southview has developments in West St. Paul and Inver Grove Heights, as well as communities in other parts of the metro.
And Dakota County Community Development Agency manages 24 senior housing complexes with more than 1,300 units, one of the larger senior portfolios in the region. But Dakota County is hardly alone in seeing more senior housing as the region and the nation climb out of a recession.
"Senior housing is one of the darlings of the real estate industry now, along with single occupancy apartments," said Thomas R. Melchior, director of market research at CliftonLarsonAllen LLP. "Projects are being planned all around the Twin Cities. Name a community and there's someone planning to do a senior housing project in it, or right next door."
Dakota County's developers have ambitious plans for build 1,000 units in Apple Valley, Burnsville and Lakeville, while the western suburbs are seeing nearly as many proposals in St. Louis Park, Edina, Eden Prairie Wayzata, Bloomington, Minnetonka and Plymouth, said Melchior. Although not all the proposals will get built -- and overbuilding is a potential issue -- there hardly seems a city left without at least one developer pitching a senior complex.
"I think every community wants to have senior housing," added Mary Bujold, president of Maxfield Research, which has produced annual reports on senior housing in the Twin Cities that show nearly all senior housing developments reside in the suburbs. The 2008 report shows six percent of senior housing units are located in St. Paul and Minneapolis.
"Most senior communities are happening in the suburbs and exurbs because that's where there is land," said Steve Ordahl, senior vice-president at Ecumen. "The last few we've done are in areas where land is available and inexpensive."
Built-up urban areas remain difficult to develop because of high land prices and expense of potentially retrofitting existing structures, said Ordahl. When selecting a potential senior development, Ecumen goes through an extensive market survey, looking at densities of people 75 or 80 and older, close access to medical care and psychological barriers to relocation, such as rivers.
Only 25 to 30 percent of the development's population will relocate from other areas of the metro while the majority will come from right next door, he noted. They'll make the jump over a river, in other words, only if their adult children live in that neighborhood.
Bonnie Clark, publisher of the St. Paul-based Twin Cities Senior Housing Guide, said many of the older inner ring suburbs such as Edina and West St. Paul have seen new senior housing as people seek to remain in communities where they have often lived for decades.
"People like to stay where they've been living because they feel a real attachment to an area," she said. "It's hard to get them to move even when their kids live in another community."
The senior market, however, has challenges. Bujold said many seniors are staying in their homes as long as possible in hopes their housing values will return to higher levels seen in the past.
Melichor, meanwhile, points out that demographics show huge growth in people 65 to 74, but not so much in the 75 plus category -- the age group most likely to consider moving to a senior housing.
"In 2021 the baby boomers will start being 75 and older and then you'll see a real increase in demand," Melichor said. "Demand is growing now, but there's a perception it is growing more than it really is. In a few years all that will change."