Developers for projects in Savage and Rosemount have backed out, citing changing market conditions in the southern metro suburbs.
Rosemount and Savage are working to revive plans for ambitious senior housing projects now languishing because their original developers have backed out.
Both cities have seen the proposed developments as key components of their municipal clusters, on large vacant sites near libraries, post offices and other city services.
Both proposed unique features. In Rosemount, Doran Cos. planned to build about 90 housing units and an adjacent senior/community center where preliminary plans included a fitness center and a cafe. In Savage, Keystone Communities’ plans called for 116 assisted-living and memory care units, 12 independent-living townhouses and a private equestrian center.
But the projects now are on the sidelines because a recent surge in senior housing development in the south metro area appears to have swamped the market for the immediate future. Lakeville and Burnsville alone have added hundreds of senior housing units in the past couple of years.
“At some point you get to where demand is being met,” said Dave Olson, Lakeville’s director of economic and community development. “I would be surprised if we would see other projects like these being done in Lakeville for a while.”
The oversupply appears to be most acute in the south metro area, but a building wave throughout the Twin Cities is making it tougher for senior projects elsewhere to get filled. The vacancy rate for assisted living properties in the 13-county area has climbed from 6 percent in 2007 to 12 percent in 2011 and 2012, according to the National Investment Center, a Washington, D.C.-based senior housing market research firm.
“There’s been a lot that’s come on line in the last two years,” said Mike Lewis, a managing partner at Keystone. He said that because of the large supply, Keystone concluded it might have taken two to three years to rent out the Savage project, much longer than the typical time frame of about one year.
Doran executives declined to be interviewed but earlier this month told Rosemount officials they also believed the market had softened.
“They had hoped demand would increase because of the aging population, but because of the new construction [in Lakeville and Burnsville] their projections were relatively flat,” said Rosemount Development Director Kim Lindquist.
Lindquist said the city has contacted two other developers that also had submitted proposals for senior housing on the site. “It’s very preliminary, but both are interested,” she said. One has suggested the possibility of building a project in phases. “That might be the answer, to try out the market,” she said.
Savage also has heard from other developers interested in stepping in for Keystone, said City Administrator Barry Stock. One indicated preliminary interest in building something similar to Keystone’s plan, minus the horse stable, Stock said.
Both the Rosemount and Savage projects would have independent-living housing for seniors but would mostly offer assisted-living and memory-care units. The new housing in Burnsville and Lakeville also is mostly assisted-living and memory care for people 75 and older. That’s a tough market for a couple of reasons.
Right now, it’s a much smaller group than the huge numbers of baby boomers who won’t reach that age for another 10 to 15 years.
“This is the calm before the storm,” said Rick Fenske, a vice president at Weis Builders, a Richfield company that has built numerous senior projects.
It’s even tougher now in the south metro, because the area has relatively fewer older seniors than more mature inner-ring suburbs, said Kathleen Conlan Joyce, a senior developer at Minnetonka-based Shelter Corp.
Census figures show that in 2010 less than 5 percent of the population in Burnsville, Lakeville, Rosemount and Savage was 75 or older. In Edina, where Shelter is seeing robust demand for one project under construction and another where work will begin next month, the number is 12 percent.
“That younger senior demographic [in the south metro] will get there eventually, but they’re younger now,” she said. That smaller base of potential customers was a reason Conlan Joyce said she decided not to pursue a site in Savage when city officials told her Keystone would be building its senior project nearby.