Components of Market Analysis for Seniors Housing and Care

Market studies are a critical component of the seniors housing development planning process. They’re hard to get right and, unfortunately, extremely easy to get wrong.

In this multi-part blog series, I’ll provide the nuances, techniques, and best practices for making your market study a successful tool that helps prevent major project failures and uncover significant opportunities.

First up: The integral components of a successful market study.

(Not) Going with Your Gut

The market study is a critical part of strategic investment plans, project planning, and project financing for new development, repositioning, and expansions. While the time and effort needed to conduct a quality market study are high, the study is fundamental to the success of a project, uncovering crucial information about the market that can stop a project—even when human intuition is giving the green light.

For the senior living industry, market studies are increasingly important because of the growing complexity of changing demographics and attitudes about seniors housing, shifting health care policy, and uncertain economic conditions. Analyzing seniors housing markets has become a highly specialized skill.

The Market Study, Step by Step

The market study typically begins after investors review the geographic, demographic, and economic conditions of a given area. They look at key metrics from data providers such as NIC to quickly assess the competitive environment and market penetration. If the review is favorable, the market study kicks off.

According to the Urban Land Institute, a successful market study comprises a number of deliberate analyses that build upon each other with a logical flow:

• Identify key stakeholders. Will the project feature a majority of independent living residences, assisted living apartments, memory care suites, or skilled nursing beds, or will it provide a full continuum of care? Will the project have a standalone building or be situated on a campus? Will the offering combine multiple seniors housing product types? How many residences will the property have? What are the distinctive features are being considered, and what is the anticipated level of acuity to be served?
• Identify the characteristics of the proposed development’s location. Is it located in a rural, suburban, or urban setting, and how are homes in the surrounding neighborhood priced? Is the area on the cusp of gentrification or is crime a concern? How easy is access to the site? How is the land currently being used? How are neighboring properties being used? Are there any known regulatory issues, zoning and parking requirements or other limitations?
• Identify the age and income qualifications of the target market. Who will be able to afford living in the new development or expansion? What is the minimum age? What are the minimum income and asset qualifications?
• Connect the data with the geography. It’s challenging to understand data without context, and demographic data can be shown on a heat map using GIS software in order to observe areas of strong concentrations of target market households.
• Observe the influencers. Are there significant concentrations of the adult child cohort (typically those households aged 45 to 64)? Is the site conveniently located relative to where they live or work?
• Define primary and secondary market areas from which the majority of demand will originate. Consider the strength of the distribution of qualified senior households and their adult children, as well as their proximity to the site, the impact of barriers to migration and mobility, and the locations of other seniors housing providers.
• Explore the target market’s characteristics. Will residents and family members be attracted by the area’s unique amenities (such as a nearby college or university, places of worship, cultural attractions, outdoor activities, sports arenas, and proximity to public transportation, hospitals, and doctors)? Is employment strong? What are the major industries? Who are the primary employers?
• Estimate supply and demand. What is the overall number of target market households in the market area that could be attracted to a new senior living development? Does demographic segmentation of the market show that the senior population is growing or shrinking? Where are comparable properties located, and how many and what type of residences do they have? What are their strengths and weaknesses? What is the project’s market position relative to key competitors?

Other useful information includes contact with planning and zoning offices to identify future seniors housing developments and soliciting the opinions of local market experts.

Coming soon: In future posts, we’ll drill down into common methodologies and the nuances of each step in the market study process. A more in-depth introduction to market studies will also appear in the next NIC Insider Newsletter. Stay tuned!

Strategies for Slow Lease-Ups & Increased Competition

Are you considering entering or expanding into a new market? Are your prospects attracted to that shiny new building that just opened down the street?

Don’t miss the “Slow Seniors Housing Lease-Ups & Increased Competition” session at the 2017 NIC Spring Investment Forum, March 22–24 in San Diego. Experts will shed some light on how they’ve generated success in competitive markets—and give insight into why some properties fare well while others do not.