ALM’s Real Estate Media Group has teamed up with industry expert Nina J. Gruen to provide
readers with answers to their most pressing commercial real estate-related questions.
Gruen, the principal sociologist overseeing market research and analysis at Gruen Gruen +
Associates, a firm she co-founded in 1970, is an expert in applying the analytical techniques
of the social sciences to estimate the demand for real estate and to understanding the culture of the groups who determine the success of development, planning, and public policy
decisions. Accomplished in both the public and private segments of commercial real estate
and development, Gruen has extensive knowledge of a variety of topics.
Dear Ms. Real Estate
Dear Ms. Real Estate:
I am considering developing senior and/
or assisted living communities for the retiring Baby Boomer generation. Because the
Boomers are such a large generation, I figure concentrating on this demographic is
likely to be profitable for years to come. Do
you agree with my contention, and if so,
what type of housing product/community
should I be focusing on?
—Surfing the Next Silver Wave
Dear Silver Wave:
You are certainly correct that the Boomers
are aging. This demographic, born between
1946 and 1964, number about 78 million, or
about a quarter of the total US population.
However, the way you phrase the question
suggests you believe that this age group will
seek senior housing and/or assisted living in
the not too distant future. But this generation differs significantly from previous ones.
Many have had the experience of settling
their parents in specialized facilities for
aging and ill seniors, and decided at that
time such accommodations are not for
them. Does this mean they will not end up in
an assisted living facility? No, it does not. But
what it does mean is it won’t take place for
many of them until their mid to late 80s,
rather than their late 60s or 70s.
Further, many Boomers are not retiring at
65—some because they are trying to make
up for financial losses in the recent Great
Recession, others who are still paying off
their children’s college debt, and still others
because they enjoy their work and see no
reason to stop at this point in their lives.
This does not mean a proportion of
upper middle income Boomers will not
decide to sell their suburban homes and
move to condos in central city and suburban
locations catering to them. This demographic seeks a very high level of services,
including housekeeping, on-site repairs, and
when called upon, pet walking. And they will
certainly not settle for the low quality of food
at many of their parents’ facilities!
Some of these higher income Boomers
will seek more idyllic (less urban) locations
with forest, water or wine country settings. At
the same time, the demand for the 1970s-80s
golf course senior communities has signifi-
cantly decreased. The Boomers are much
more likely to spend their recreational time
hiking or biking, rather than golfing.
Many middle-income Boomers will
remain in their homes, particularly those
who have paid off their mortgages. If they
have offspring, many of these adult children
will take responsibility for their parents’
care, supplemented by home health aides.
Those who do not have these options will
increasingly rely on Medicare to pay for their
24-hour care when that time comes.
Ms. Real Estate does agree with your contention, but not necessary in your timing.
She recommends your getting into the
senior housing business in the latter part of
this decade. By the middle of the next
decade, demand will likely begin to surge.
Dear Ms. Real Estate:
I am the chair of a citizens’ committee in
a uburban community, charged with investigating whether a hockey sports arena or a
20,000-square-foot contemporary art
museum would induce long term economic
benefits through encouraging regional tourism. The site envisioned for either a sports
arena or museum is located in close proximity to our city’s downtown. Our downtown is
doing moderately well, with approximately
250,000 square feet of retail and office uses
and a growing residential population.
In order to induce either and arena or an
art museum use to locate in our city, we
would offer to pay for all needed infrastructure, including adequate parking, as well as
provide tax relief for the first 15 years. What
advice do you have for our committee’s
work? Specifically, what questions should
our committee be asking?
—Caught Between a Rink
and an Art Space
Dear Caught Between:
I’d like to commend you for asking the right
question. Both options are very iffy—unless
under some very special circumstances.
If the question was between a major
league ball team or a potentially world
famous museum like the Gehry-designed
museum in Bilbao, Spain, past experience
shows clearly the museum is the way to go.
First, because it attracts daily visitation, and
more importantly, attracts worldwide tourism. Ball games, unless they’re bowl games,
rarely attract destination tourism, and sports
teams do not play all year round.
But your situation differs significantly.
Some communities, like Glendale, AZ, have
struggled to attract sufficient attendance for
a profitable hockey team. I would advise you
to contact the NHL to see if they will provide
attendance numbers for all their U.S. locations. Then try to gauge which locations are
likely to be most similar to your own.
You will also need answers to some critical
questions vis-a-vis the museum option. First,
will the city be the owner, or will the museum
be under the auspices of a university or well-funded non-profit? Will the capital costs be
primarily paid by philanthropic businesses
and/or individuals? It is important to ascertain whether the facility will be used to house
outside exhibitions or its own unique collection. The latter, of course, is more expensive,
since it involves care, upkeep and storage.
Finally, last but by no means least, are
there primary sports teams and art museums
already located in the central city of your
region, as well as within competing suburbs?
To the extent there are, the most critical
question your committee needs to answer is
what is the probability that your hockey team
or museum option is likely to be able to successfully compete, and in the case of the
sports team, be allowed to transfer their
franchise to your location?
Sorry I couldn’t be more positive in my
response, but better to forsake a dream than
live a nightmare.
If you have a question you’d like to pose to Ms.
Real Estate, email the editor-in-chief, Sule Aygoren,
at firstname.lastname@example.org. It may appear in the next
issue of Real Estate Forum. ◆
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