If you’re developing real estate housing projects for baby boomers, there are many critical dimensions to think about. These will include making the financing case, addressing the customer value proposition, and more. But the best way to approach them all is to think more deeply about the reason you are doing what you do. The article below, “Start with the Why” by Ryan Frederick, originally appeared in the 2021 MFE Concept Community Report.
Simon Sinek became a YouTube sensation with his 2010 TEDx Talk, “Start with Why.” The video has been watched more than 55 million times, and his book with the same title is a New York Times best seller. The message is simple but powerful: The most successful companies provide a compelling reason for why they do what they do. This compelling reason drives customer loyalty, increases employee retention and builds an inspiring brand. Apple, one of the world’s most valuable companies with a market capitalization of more than $2 trillion, is an example of a company that has excelled with this philosophy at scale.
As real estate developers and investors consider creating communities and offering services for baby boomers, a cohort 78 million strong with ages ranging from 57 to 75, it is critical to start with the question, why? There are at least three dimensions to consider:
Start with Why: The Financial Decision—With such a large cohort, there will be plenty of people looking for housing options as they age. Demand is not in question. But there’s more. Older adults tend to move less than younger people such as millennial and Gen Z consumers. The benefit for apartment owners is that there is less annual turnover of residents. It is not uncommon for renters over 50 to stay five years or longer. In addition, older adults that elect to move into apartments out of choice— “renters by choice”—tend to spend more for living environments they desire. Some apartment buildings that target older adults through design and programming have shown to receive a rent premium over equivalent conventional multifamily peers. This premium can range from 15% to 30% or more in some cases. All in all, the financial opportunity represented by the boomers is an attractive one.
Start with Why: The Customer Value Proposition—While the outlook for demand is attractive, older consumers can be fickle. Prospective residents, especially those living in single family homes, need a compelling reason to move. Considerations can be bracketed into two categories: pull and push. Pull factors draw people to a residence, whereas push factors drive people out of their current residence. Examples of pull dimensions include attractive unit design that incorporates universal design principles, ample common spaces for activities and socialization, a friendly and lively cohort of residents and hospitality-oriented staff. Examples of push elements include an existing residence that is expensive and difficult to maintain, is difficult to navigate with stairs, is geographically distant from desirable amenities and risks social isolation and loneliness.
Older consumers are generally not on an urgent timetable to move, unlike young people who need a place to live when graduating from school or relocating for a new job and can’t afford to purchase a home. Those that do have an urgent need to move may have health risks driving a change, and apartment living may not be the best option for them. As a result, apartment buildings targeting older adults tend to take longer to absorb than conventional apartments even when the value proposition is clearly understood by prospective residents and their families. However, if the value proposition is not compelling and a project is age-restricted, thereby limiting the market size, lease-up risk can increase significantly.
Start with Why: Helping People Live Longer, Healthier and More Purposeful Lives. Following Simon Sinek’s core message, the most successful developers and investors appeal to a deeper purpose. Successful aging is driven primarily by wise lifestyle choices; only about 30% of longevity is linked to DNA. Purpose in daily life, social connectedness, physical activity and financial security are all linked to longer, healthier lives. Real estate developers and investors have an opportunity to create an environment that helps boomers thrive as they age. Such a mission not only appeals to prospective residents but can also draw and retain a passionate workforce and engage partners, such as architects and third-party service providers, in a deeper way. It can be noble work that helps people take advantage of longer lives and fill an important housing need between single family homes and senior living.
I have firsthand experience applying this framework. I created The Stories at Congressional Plaza, an age-friendly apartment community in Rockville, Maryland, in partnership with Federal Realty Investment Trust, a public retail REIT. From the beginning, we framed our project using the question of why. It influenced our brand, location, design, operating model and key hires. Not coincidentally, the effort was both financially successful and impactful for residents. In fact, one baby boomer described the decision to move into The Stories as one of the best decisions of her life.
Aging baby boomers represent a golden opportunity for real estate developers. But without the right approach, it is more likely to turn into a failed or missed opportunity. Be sure to start with why.
Ryan Frederick is the CEO of SmartLiving 360, a strategic consulting and development firm focused on age-friendly communities. He is the author of the book “Right Place, Right Time: The Ultimate Guide To Choosing a Home in the Second Half of Life,” published by Johns Hopkins University Press. More information is available at www.smartliving360.com.