Uncategorized

Retail’s Struggles Open Opportunities for Senior Housing in Mixed-Use

In Washington Township, New Jersey, a 35-acre plot of long-abandoned farmland has a new lease on life.

This vacant site will soon be home to Washington Square Town Center, a massive mixed-use development incorporating medical office and assisted living as two of its components. This is a marked contrast to what the co-developers, Woodmont Properties and The Atkins Cos., envisioned 13 years ago.

Originally, Washington Square was to include a significant traditional office space footprint, along with more retail. But suburban office and brick-and-mortar retail construction have struggled in the post-Great Recession commercial real estate boom, and the development team was forced back to the drawing board, Woodmont Properties EVP and General Counsel Stephen Santola told Senior Housing News. They soon realized the site and master plan would be ideal for including a senior housing component.

Advertisement

“It made us reconsider what made sense,” he said.

This project is just one example of how large-scale changes in the economy are leading to new models of mixed-use development, with health care starting to anchor these sites more than in the past — a trend that could present significant opportunities for senior living in the years to come.

Retails losses are health care’s gains

Senior housing is gaining momentum as a component of mixed-use development. This tracks with the ongoing trend of health care development replacing retail in mixed-use projects. The disruption brought about by e-commerce has forced several big box retailers to cease operations, curbing new retail construction and leaving scores of empty storefronts.

There’s some wisdom in the way we used to build cities a century ago with busy streets, first-floor commercial uses and people living above those spaces.

Evergreen Real Estate Group Director of Development David Block

Coincidentally, the 2010 Affordable Care Act sparked a change in health care, which has shifted from a focus on acute treatment to prevention and wellness. Health care development, in turn, has pivoted away from a campus environment centered around a hospital, Hammond Hanlon Camp Partner PJ Camp told SHN. Hammond Hanlon Camp is a firm specializing in health care finance.

“Who wants to go to a hospital when you can have a procedure done more conveniently?” Camp said.

For hospitals, there are financial benefits to this move. It is cheaper to provide care outside of a hospital setting. Patients demand the convenience of visiting clinics in their neighborhood. This trend is known as the “retailization” of health care.

The aging population is also driving this trend, Camp said. There is a desire among seniors to live in walkable live/work/play communities, and health care is a large part of that.

That shift in health care development is gaining momentum, Gensler Regional Health & Wellness Practice Leader Bonny Slater told SHN. Gensler is an international architectural and design firm, headquartered in San Francisco.

“Hospitals are now health systems,” Slater said. “They’re entering the retail space and fighting for market share.”

Gensler is designing the medical office component for the Conway Center, a mixed-use development in Washington, D.C. incorporating affordable housing with medical services, traditional office space and retail. The medical office component, operated by Unity Health Care, will include a community clinic, specialist care, a dental office, pharmacy, labs, behavioral health and urgent care. This fills a void in hospital services in southeast D.C., and will be the largest primary care clinic in the area.

Mixed-use development comes full circle

While these types of developments might seem like a new direction, modern mixed-use is taking its cues from the development trends of the past, Evergreen Real Estate Group Director of Development David Block told SHN. Today, mixed-use generally reflects a broader move away from a more single-use, suburban model and into a model more suited for dense urban environments.

“There’s some wisdom in the way we used to build cities a century ago with busy streets, first floor commercial uses and people living above those spaces,” Block said. “This creates the kind of culture where people want to live. We’re seeing that with millennials, but even among seniors there is an appeal to this.”

Perkins+WillEvergreen Real estate Group was the developer behind two mixed-use developments in Chicago, where affordable senior housing was built on top of new Chicago Public Library branches.

Evergreen is the developer behind two mixed use projects in Chicago where affordable senior housing is being built above new Chicago Public Library branches. There is a need for affordable senior housing across the country. Putting senior housing together with a library allowed the project to be funded using federal and state funds as a private-public partnership (P3), Block said. Having those funds as part of the underwriting allowed Evergreen and the design team to bring higher-end design elements to the construction.

“If this were strictly a privately-funded project where the library built it themselves, they would have to find other avenues of funding,” Block said.

Projects like these, the Conway Center in D.C. and Chicago’s Center on Halsted — the largest LGBTQ-friendly community center in the Midwest, which includes a senior housing component — rely on creative funding sources such as federal and state grants, incentives and tax credits. But the success of these projects is making market-rate developers take notice.

Owner-operators such as Belmont Village, Maplewood Senior Living, Royal Senior Care, Generations LLC and Ryan Companies have senior housing included as part of massive mixed-use projects. Real estate investment trusts (REIT) such as Welltower (NYSE: WELL) are pursuing mixed-use opportunities, with CEO Tom DeRosa recently noting that health care is replacing traditional retail anchors

“Hospitals are now health systems. They’re entering the retail space and fighting for market share.”

Gensler Regional Health & Wellness Practice Leader Bonny Slater

Toledo, Ohio-based Welltower is currently involved with two mixed-use developments in Mission Viejo, California and Charlotte, North Carolina, Welltower CIO Shankh Mitra told SHN. The Charlotte project is a redevelopment of a former shopping mall adjacent to an acute care campus owned by Atrium Health. Welltower will construct ambulatory care buildings to anchor the development

“This project will incorporate multifamily, office and hospitality to draw in people from all over,” Mitra said. “We’ll see more projects like that and senior housing will be a greater component.”

Carving a place for senior living

Developments such as Washington Town Square, for now, are relatively unique. With baby boomers set to age into senior housing in waves over the next decade, however, there will be more opportunities to include senior housing as a component of mixed-use developments, as well as increase the scale of a community. As seniors live active lives longer, the demand for communities in vibrant, dense, intergenerational urban environments will dictate where new developments will be built.

One example of that potential future is the Center on Halsted, which stretches for nearly a block in Chicago’s Boystown neighborhood. The center is an enormous mixed-use development offering activities, mental health and wellness programs, legal services and a community meeting space, retail anchored by a Whole Foods Market and Town Home Apartments, and a 79-unit apartment building for seniors age 55 and over. Slater believes this can serve as a template for incorporating senior housing into future mixed-use developments.

“People want to be part of dense, vertical walking communities,” she said. “This is mixed-use, within a tight-knit community.”

Welltower is building 300,000 square feet of medical office as part of a mixed-use redevelopment in Charlotte, North Carolina.

Welltower is focusing its mixed-use efforts exclusively on urban markets, Mitra said. The demand is already there, and mixed-use development can be a complicated and lengthy process.

“It took Pappas Properties [Welltower’s partner in the Charlotte redevelopment] 10 years to assemble the land,” Mitra said.

Washington Square Town Center offers another template for the future. This project will comprise of 330 luxury apartments, 110 townhomes, 30,000 square feet of retail, 40,000 square feet of medical office and a 110-unit assisted living community. The Wegman Companies, a Rochester, New York-based real estate developer and investor, and Seattle, Washington-based investment firm Columbia Pacific Advisors will develop the assisted living community.

The assisted living and multifamily components provided a couple shared strategies, Santola said. Typically, assisted living communities in suburban and exurban areas tend to be isolated. After a few meetings, it became clear that all parties were interested in combining assisted living with Washington Town Square’s other components.

“We agreed there were benefits to providing visitors, employees and residents access to retail,” Santola said. “And there was further interest in the multifamily portion, in that the senior housing workers could rent apartments and walk to work.”

Source Article