Assisted living demand skyrockets

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Friday, February 27, 2009 Modified: Wednesday, March 4, 2009

While real estate demand in almost every sector is flat, one sector of the market is off the charts.

The demand for assisted living will outpace the supply of available housing in the coming years, and many facilities in Silicon Valley are already near capacity, with rents ranging from $2,000 to $5,000 per month, depending on services.

Merrill Gardens LLC is capitalizing on the momentum and is set to open two new assisted living facilities in Silicon Valley. One is in the Willow Glen neighborhood of San Jose, while another is planned for the city of Campbell.

The Seattle-based operator is working closely with Barry Swenson Builder to construct the 98-unit facility in Willow Glen that is slated to open on May 1. The Campbell project

is a mixed-use community made up of 101 senior rental units for assisted living, 26 rental units not restricted by age and a separate Alzheimer’s facility. It is scheduled to open in 2011.

CEO Bill Pettit said Merrill Gardens chose Silicon Valley because there haven’t been any new facilities built here in the past decade. Between the two new projects, Pettit said the company has made a $90 million commitment in housing to this market. Merrill Gardens already has assisted living communities in Fremont, Vallejo, Sonoma and Rohnert Park, with 54 communities nationwide.

Big market
Assisted living is a $38 billion industry. Today, 1 million Americans reside in assisted living facilities, according to the National Center for Assisted Living.

Paul Williams, director of government relations with the Assisted Living Federation, said occupancy rates in assisted living have decreased somewhat — from the 90s to the high 80s — but not drastically. The average age of a resident now is 85 years old, but that is going to change.

The need for assisted living is only going to increase once baby boomers
reach that age bracket, Williams said.

Pettit adds that companies will be unable to build communities fast enough to meet the growth of the senior population.

The existing facilities in the United States can serve less than 10 percent of the current 38 million Americans over age 65, Pettit said.

“We’re adding almost 10 million seniors every year,” he said, “and with the rapid increase in seniors, the market will become increasingly competitive to find an assisted living facility.”

Pettit said Merrill Gardens is currently at 91 percent occupancy across the country.

“There’s almost no new development going on in 2009 because of the financial markets, and it takes two years before a building is ready for occupancy,” Pettit said. “Seniors who have held off because of economic conditions will be competing with other seniors when the market normalizes.”