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Assisted-Living Projects Wait for Boomers to Make Their Move

Local construction companies — including Bycor General Contractors and Legacy Building Services Inc. — have recently made their mark with projects in the realm of assisted-living retirement communities, expected to play a growing role in the lifestyles of aging baby boomers.

But company leaders and other experts are not ready to declare the segment a high-growth source of work for contractors, as much as they’d like to see the local building industry get more construction assignments.

“The demographics just aren’t there yet,” said Bycor CEO Scott Kaats, noting that the oldest boomer is currently 66 years old, well below the average age of U.S. care center residents. “It’s probably going to be another 15 years before you can call it a growth industry.”

San Diego-based Bycor in the past five years has completed building and renovation projects at several communities, including five in San Diego County. Most recently, those have included new construction at ActivCare at Bressi Ranch in Carlsbad and Seacrest Village in Encinitas.

Active Projects

“These types of communities do have renovations and expansion projects that take place over time — really no different from other industries,” Kaats said.

Legacy Building Services of San Diego recently completed construction of a performing arts center at Walnut Village, a continuing care community in Anaheim. Work included converting a former church into a performance space, and adding changing rooms, offices and restrooms.

“We’d like it to be a growth industry, and the potential is there,” said Legacy President Tom Remensperger, referring to the retirement community sector.

Work in that segment in recent years has been sporadic, although he said Legacy has done several renovations over the years in the San Diego and Phoenix areas.

Along with locally based Hazard Construction Co., Legacy also was tapped to build Comm22, an $80 million mixed-use project that recently broke ground in southeast San Diego and will include 70 affordable senior apartments. Its developers include Bridge Housing Corp. of San Francisco.

Tim Barr, Legacy’s business development director, said there are currently not many retirement center projects under construction, largely due to lagging housing industry demand and relatively high costs to obtain land for local developments. However, the company is exploring ways to boost its presence in the retirement care industry over the long haul.

For instance, he said urban planners point to a rising trend in places like the Pacific Northwest, where retirement communities are being built alongside student housing projects in college areas. Active seniors seeking learning opportunities and energetic environments make year-round use of adjacent food service and other education-related facilities, making projects more feasible for developers.

According to the research firm IBISWorld Inc., the average age of residents in U.S. independent and assisted living facilities is 87, with most people entering the facilities in their late 70s to early 80s.

Anna Son, a retirement care industry analyst for IBISWorld in Santa Monica, noted that development of stand-alone retirement facilities remains muted, largely because of a still slow single-family housing market.

Staying Home, for Now

“There are some people who have retired, but they’re waiting for housing prices to go back up before they sell their homes and move into these communities,” Son said.

Also, rising costs for treatment of dementia-related illness, as residents hold off on entering facilities for conditions like Alzheimer’s until they are in late stages, have cut into profitability for the centers.

Son said new development of retirement community projects likely won’t rebound until those variables improve. For now, IBISWorld projects the industry’s revenue will grow 4.7 percent annually over the next five years, a slight improvement over the 3.3 percent seen during the past five years.

She said communities that do get built in coming years will require more high-tech amenities, architectural features and active lifestyle elements, to fit the changing needs of retirees.

Michael Grust, CEO of retirement community developer Senior Resource Group in Solana Beach, said the national development climate is slowly warming, but has yet to return to pre-recession levels as the average age of new residents continues to rise.

His own firm recently completed a retirement community in Scottsdale, Ariz., and has four other projects in early planning stages in Texas, Orange County and Northern California. “The operators that are still active are those that are able to add value to the project, and can ease concerns about people’s home values to where they will want to come to these properties for a better quality of life,” Grust said.

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