Why Active Adult Is An Important Segment For Investors

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On today’s show we are talking about how the active adult segment is one of the most important new segments in residential real estate. When we think about residential real estate, we need to think about demographics. All people tend to go through a housing life cycle. They start out living at home with their parents. Then they get their first place on their when they move out for the first time. This is usually a rental apartment, maybe student housing, maybe with a roommate. This is the start of the expansion phase. It’s more space than just the childhood bedroom. Then eventually they may buy a house if and when they start a family. Then maybe a larger house to accommodate a growing family. 

The empty nesters will live in a big house for a while with a lot of empty rooms and eventually realize that it’s too much house and too much property. It’s time to downsize. This can take the shape of several different decisions, depending on when they make that decision. They might choose a smaller home. Downsizing involves several steps as well. This might culminate in a senior home, or moving in with adult children. But the intermediate steps, before senior housing are particularly important for real estate investors to understand. 

At some point people may choose something that is lower maintenance. That could take the form of a condo, or a rental apartment. The process of downsizing involves getting rid of a few decades of accumulated belongings. It’s a process that involves a sense of loss. But the problem with all these choices is that these moves disrupt the social fabric, especially if the move involves a change of city. 

Adult children have moved out and are launching their own lives. The parents feel an acute sense of loneliness. The contact with their children is vastly diminished. Contact with friends is reduced, especially if they move city. 

Our western society faces a crisis of loneliness and this is even more acute for people in their middle aged years. 

Nobody aspires to move into an old folks home. So senior housing is seen as a necessity more than a choice. Moreover, senior housing is extremely expensive compared with any other form of housing.

This is where a relatively new category of product comes into play, called active adult. This is an age restricted product with an emphasis on class A finishes, an amenities rich offering, and a strong sense of community. The community has an activities director who organizes all of the social activities, whether it is a fitness class in the indoor swimming pool, or a pickleball tournament, evening social events, all manner of activities which emphasize an active lifestyle but also cement social connections. Active adult is positioned in between a market rate apartment and independent living. 

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