It's no surprise that many businesses stand to cash in on the wave of boomers about to turn 65. Homebuilders are especially well positioned. Mature homebuyers–the retired or semi-retired–will drive three-quarters of the housing growth in Canada over the next decade, according to Clayton Research, a real estate economics consulting firm in Toronto. For developers of retirement communities, the challenge is to figure out what this generation of retirees wants in a home, and in a community.
The first obstacle is convincing people to move at all. Not only are Canadians retiring later in life, they're staying in their current homes longer. “One of the trends right now is aging in place,” says Clayton vice-president Peter Norman. “Instead of buying a new place, people are opting to renovate existing home for retirement.” Norman says this trend partly accounts for the healthy home-renovation market, which has jumped around 10% each year for the past decade.
In the United States, one in four building permits is for a retirement community–traditionally thought of as age-targeted villages consisting of bungalows, a clubhouse and a golf course. But American developers were concerned boomers would find the concept unappealing, which is exactly what Feinberg & Associates, a home design firm in New Jersey, discovered in focus groups conducted from 2003 to 2005. Boomers wanted to avoid the stigma of old age, preferring instead to live with people of all ages. They also disliked the uniformity of most retirement housing designs. That attitude has shifted slightly, however. ProMatura, a Mississippi market research firm that deals with seniors, found only 46% of adults over 55 refused to live in an active lifestyle community, versus nearly 80% in 2000.
If developers are to appeal to this demographic, they'll have to change their approach, and the popularity of retirement communities in Canada depends on how appealing they can make the concept. That will make the difference between whether retirement communities make up 5% or 10% of the total empty-nester demand in coming years, according to Clayton Research.
“The generation before boomers would settle for the basics,” says Ann Parsons, sales and marketing manager for Ontario-based Phelps Homes, a specialist in adult lifestyle communities. “Baby boomers want nothing but the best.” Builders are already seeing a demand for higher-quality retirement housing. Phelps Homes offers customization options–and buyers are taking full advantage, driving up the cost of a home by up to 25%. “Before, we could put together a few floor plans and that would be it,” says Parsons. “Now, the customer is much more finicky and demanding.” Buyers are upgrading with the likes of gourmet kitchens and home theatres, proving that downsizing doesn't mean a loss in luxury.
Real estate agents will also have to work harder to establish a relationship with potential buyers if they expect to sell. Dave Rozycki, co-CEO of Parkbridge Lifestyle Communities, a Calgary-based builder with developments in Alberta, Ontario and Quebec, says it can take customers up to two years before settling on a home. “This is not an impulse purchase,” says Rozycki. “This could be the last house they own.” That means having the patience to develop long-term relationships, notifying customers about open houses and new developments, and responding promptly to customer inquiries.
Parkbridge, which began investing in retirement communities in 1999 and now owns 16 in Ontario and Alberta, has seen profits jump 85% in the past three years, to $16.7 million. But it won't be easy for other Canadian developers looking to enter the market. Rozycki says securing and zoning land is increasingly difficult, and starting a retirement community is capital intensive. “You're not just building homes,” he says. “You're building rec centres, indoor pools and golf courses. It takes a company that's solid financially to build these communities.” With land that can range from $50,000 to $200,000 an acre, plus $25,000 in infrastructure costs for each individual lot and another $1 million for a clubhouse, Rozycki says it can take years before developers see a return on investment.
The startup costs, along with the time it takes mature buyers to decide on a home, are why many builders are “loath to approach the market,” says Klaus Rohrich of Taylor/Rohrich Associates, a Toronto advertising agency specializing in marketing mature housing. But with 35% of the population set to be over 50 in five years, builders who ignore the demographic are doing themselves a disservice. “The mature market is extremely profitable,” says Rohrich. “They've got all this extra money rolling around, and they're going to treat themselves.”