Active Adult Data-Driven Market and Product Selection — Episode 2

As part of NIC's Active Adult podcast series, host Caroline Clapp sits down with Kimberly Byrum, Managing Principal, Multifamily, at Zonda Advisory Group, to share insights on how developers and investors can use data to identify the right markets and product for active adult rental communities.

Byrum draws on Zonda's market study work to explain how demand sizing for active adult differs from conventional multifamily — shifting from jobs-driven econometric models to a more demographic-driven approach centered on financial characteristics, the existing pool of 55-plus renters, and mobility patterns. The conversation covers current supply and occupancy trends, how to track a market's development pipeline, and a framework for evaluating and ranking markets.

The episode also dives into product fundamentals — unit mix, optimal project size, and market penetration and saturation analysis — along with which amenities deliver the strongest ROI. Byrum wraps up with a candid look at common site-selection mistakes and where she sees underwriting standards heading as the sector matures.

This episode offers a practical, data-backed look at how to evaluate markets and products for active adult today. Thank you to Treplus Property Management for sponsoring this episode.

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Transcript

Caroline Clapp: Hi everyone, and welcome to NIC's Active Adult podcast series. Thank you to Treplus Property Management for sponsoring our NIC Chats podcast series on active adult. From prelease to operations to lifestyle engagement, TPM's full-service management solutions are purpose-built for active adult communities, designed to maximize NOI for owners and investors. 

I'm Caroline Clapp, Senior Principal on the Research team at NIC, the National Investment Center for Seniors Housing & Care. We are a nonprofit real estate research organization focused on senior housing. One of NIC's subject matter areas is active adult rental communities, which NIC defines as age-eligible, market-rate multifamily rental properties that are focused on enhanced lifestyle programming without providing meals. 

Those are the parameters that NIC MAP uses to track active adult rental communities. 

Welcome to Episode 2 in NIC's Active Adult podcast series, where we are speaking with Kimberly Byrum, Managing Principal, Multifamily, at Zonda Advisory Group. Kimberly will cover this episode's topic, Data-Driven Market and Product Selection. 

Thanks for being with us today, Kimberly. 

Kimberly Byrum: Thank you for having me. Excited. 

Caroline Clapp: Great. To kick it off, tell us about your multifamily work at Zonda. How much of your work today is focused on the active adult sector specifically? 

Kimberly Byrum: We do about 150 to 200 market studies a year with clients, and I would say an average of active adult product within that is between five and 10. 

It's a little higher this year, believe it or not, because multifamily is down. I think the starts show that. But overall, that is a product sector that we think is growing, and we're very excited to elevate the research and the analysis that we're doing for the feasibility of this product type. 

Caroline Clapp: Yeah, great. I'll put a slide up, and for those who are listening, we're showing that active adult occupancy rates are above 90% on average today. So, Kimberly, with Zonda's work, how would you characterize the current state of the active adult rental market fundamentals? 

Kimberly Byrum: Well, I'd use a couple of words. Tempered, for performance currently. We are underperforming the national vacancy of traditional multifamily currently, so I'd like to see that move up over the next year. But I would also bring to mind another word, or a hyphenated word, which is submarket-centric. 

While we're looking at these national numbers, and we'd like to see those get above 95 again, there are definitely submarkets that are performing very well. 

Caroline Clapp: That makes sense. So let's get into demand then. What are the core metrics that Zonda uses to size active adult rental demand in a given market, and how is that methodology different from how you'd look at conventional apartment demand? 

Kimberly Byrum: Yeah. Well, as you know, Caroline, the multifamily data is very rich in history, and NIC is doing a great job building that history on the active adult side. 

When we look at multifamily markets, we construct very jobs-driven predictive models, and we are able to do more regression-based models. Of course, the fallacy of those is that they are looking at history and don't always project forward to some of the opportunities that we see in new submarkets. But certainly, it's a pretty high level of demand forecasting, and you see that across the industry. There are many great housing economists who are constructing these types of models. 

On the active adult side, it is more demographic-driven. And of course, there are several different groups out there that forecast demographics. So it's a little more of a static analysis. In our models, these are all much more what I would call waterfall demand sizing rather than econometric modeling. 

Within that, you've got to understand each of the data points and what the limitations of those are. What we're really focused on, and we've changed our models over time, are really four factors. 

Of course, income, or net worth more importantly with that age group. The preference to rent, and that's something that you'll hear me say several times as we continue this discussion. Are there 55-plus renters in a market? Are they already accepting that renter lifestyle? Because that's a much better pool. We're not having to convince people to move out of their home. They're already in the market, and they're willing to rent. 

The great research that you guys have done lately on the acceptance of that age-restricted lifestyle, that's a big cut that we take off the demand pools that we're looking at. 

And then finally, another pot that I'm banging right now is that timeline for moving. I know you guys did some research on that. We also look at some of the government data on mobility patterns. You can look at that by age group, so that's something that we definitely are focused on. 

Of course, there are the additives, but I don't like to rely on those. Those are the baby chasers, or the influence of those adult children who are out there and want to move their families closer, whether to be closer to the grandkids or because there's some kind of situational health problem. 

But for me, when I look at the overall waterfall, when I highlight risks focused a lot on those additives, it can indicate that the lease-up may take much longer. 

Caroline Clapp: Yeah, those are all really great demand metrics for people to know about. And we are hearing more recently, as you mentioned, that a few years ago, most active adult rental residents were coming from a single-family home that they were selling. But more and more, they've already downsized, and so you're looking at the rental market as well, and not just going for the homeowners. 

Kimberly Byrum: Absolutely. Absolutely. 

Caroline Clapp: So that was demand. Let's pivot into supply. I'm going to put a slide up here. For people who are listening, we are showing the active adult rental inventory by the year these properties opened. 

It's still a relatively new product type, the type that we're talking about today, and about half of it was developed in the past 10 years. 

So for new supply, how, at Zonda, do you track the active adult pipeline, and are there sources or resources that you recommend? 

Kimberly Byrum: Well, it is definitely a lot of rolling your sleeves up and doing primary research to get a handle on what's going on in these micro-market areas. 

So hats off to y'all for keeping that inventory fresh. We do things like reading the P&Z agendas going back a couple of years just to see what's been discussed or what's in the process of being rezoned. Some of the challenges are that it may just say senior housing, and it may not say what kind. 

Sometimes you're just not sure, so you may include that. And that's an important point. When we're looking at these micro-markets, we understand how sensitive the competition is. One new supply in a market can really impact your absorption and your occupancy. 

Many times we will underwrite what we'll call a phantom community if we don't have a sense that there's anybody in the market, just assuming that because we're there and we're interested, potentially another product might hit the market. The reason for that is to give us a sense of how deep the market is if we had to go head-to-head with another competitor. 

The brokers do an amazing job in a lot of these local markets of keeping lists, but sometimes those can get a little stale. They keep a lot on there from 2022 and 2023, which were more of the heyday when people were looking at doing deals. Those projects may have been dropped and shouldn't be on the list anymore. So it does require calling or following up either with city staff or talking to the developer specifically about whether those projects are still a go. 

Caroline Clapp: So really thorough due diligence, making sure the data is fresh, accurate, and conservative as well if you're doing the phantom community. 

At NIC, we are trying to do a lot of work on educating municipalities because calling active adult senior housing is not really an accurate description. 

Kimberly Byrum: Yes. Yes. 

Caroline Clapp: Great. 

So let's get into market selection. Walk us through Zonda's framework for evaluating and ranking markets for active adult. What are some of the variables that you're looking at? 

Kimberly Byrum: Well, I kind of already hit those points, but it's very important to me right now to look for those renter pools. Again, because this last wave of development that has come through the system has leased up or is in the process of leasing up, we've learned a lot from that. 

One of those things is how slowly these things can absorb. We think the success really lies within those markets where we can find pockets of older renters who have accepted the rental lifestyle. So that's, again, a really big cut for us. 

My second point was that timeline for moving. There's some great government data out there that you can rely on that talks about people who are moving within the market and people who are moving into the market. Ideally, you want to have both. You want to have a lot of mobility within the market and people also moving into the market. 

A market that pops up with both of those characteristics would be Myrtle Beach. People are moving there, and people are moving around within that market. So that would be ideal. Not everything is perfect, but those are two attributes we'd really be looking at on the market selection side. 

Caroline Clapp: Great. That's really helpful. Thank you. 

We'll put a slide up here with NIC MAP data showing the 15 largest active adult rental markets that we track by the sheer number of units within each market. You can also see the occupancy rate for each of these. Again, the national occupancy rate is above 90%, a little over 91%. 

You started talking about Myrtle Beach, but what other markets look compelling to you today? 

Kimberly Byrum: Well, when I look at this list, and I look at the bottom of it, what really pops into my head is the oversupply that we are seeing on the conventional side, and it is seeping over into some of these primary markets where there are deeper pools of renters. 

Kimberly Byrum: Obviously, more inventory. They're large markets, and that's wonderful. But I have a star by Dallas and Las Vegas. Maybe not so much Houston, because we've worked through a lot of that, and they kind of march to a different drum in Houston than most of the economy. Of course, Austin and Phoenix. 

While those occupancies are low in those markets, I do believe they are experiencing some of the... I hate the word softness, but a highly competitive situation that we're seeing on the multifamily side. So that is impacting active adult performance. 

Caroline Clapp: Yeah, that makes sense. So the chart shows Austin and Phoenix at the bottom here. 

Just sort of zooming out by region, you're starting to touch on this, but a lot of the recent capital we've heard has gone to the Sun Belt metros. Is there a case for the Midwest, the Mid-Atlantic, or the Northeast regions? 

Kimberly Byrum: Yes. We do like the Midwest, but I always give that one a caveat because you cannot assume that the Midwestern sensibility will pay top-of-the-market rent, even if they have the money. 

We're always very careful on the rent premiums that we may underwrite in those markets. Some of the things that do appeal to the Midwestern sensibility are that lower turnover rate that you would see in an active adult community, both with the residents as well as with the staff. 

We know that, statistically, multifamily staff turns over much more often than the longevity that we see on the active adult staffing side. So those are things that we can push forward, and I think they make a lot of sense in the Midwest. 

The Mid-Atlantic and Northeast are always great markets, usually not for people moving there so you're not going to get people relocating to those areas. It's more people moving, downsizing, or already renting in the area. But those are very hard and difficult markets to develop in, so you have to have a lot of patience and time to get these projects pushed through because there's a lot more NIMBYism in those markets. 

Caroline Clapp: Yeah, that's great. 

But it's basically everywhere. We'll put up a map of where all the active adult rental inventory is, and it's across the U.S., not just in the Sun Belt. 

Here I'll put up a slide. We started to touch on this, but market penetration rates. Overall, we calculate only a 0.5% penetration rate for active adult compared to households age 65 to 84. Senior housing looks at households age 75 and older, and that's a 10% penetration rate. 

You started to talk about comparing it to multifamily, but how do you think about market saturation and competitive set analysis? 

Kimberly Byrum: Well, those capture rates and penetration rates that the industry uses... I'd love to move away from those because sometimes they don't tell you the whole story. 

One of my best examples is that we were recently working on a project in Riverside, California, where the market penetration rate in this micro-market area was almost 100%. But the comp set was 100% occupied, and one of the projects was over 450 units. 

To me, that really says I still want to investigate. I want to go further because, if you stop at that market penetration rate, you would question whether you should make that investment. 

I always caution that there is no good or bad. It certainly gives you a relative comparison to other deals you've done or other markets you've been in, but it is not a go/no-go statistic as far as I'm concerned. 

When I do look at those, specifically when talking about conventional multifamily or independent living, assisted living, and memory care, I definitely lean more toward looking at what's going on in the conventional apartment market. 

Now, when we're looking at pricing, I think it's a great tool to say, "Here's where the next level of care is and how much this costs. Here's where the apartment market is. And here's where my active adult product is going to be positioned within that range." 

But I don't think anyone in the industry would use independent living to help price their active adult product. I think they would be looking more toward multifamily. Again, those are two different sectors that we may be losing residents to, depending on the age. 

Caroline Clapp: Yeah, that makes sense. That's what we hear on the valuation side as well. You look at conventional multifamily first, and then maybe independent living second. 

Your point on market saturation is the same in traditional senior housing. You could be in a market with a high penetration rate but also a high occupancy rate, so it's just a well-accepted product type. 

Moving into product, NIC MAP reports that the active adult rental inventory it tracks is pretty evenly split between one-bedrooms and two-bedrooms. There are some three-bedrooms and den units as well, but it's mostly half and half. The median size is 137 units, so a little smaller than independent living and a lot smaller than conventional multifamily. 

When you survey performance data across active adult, what do you see as the optimal unit mix? 

Kimberly Byrum: Well, we're definitely seeing the project sizes get bigger, and that is also true in the conventional market. I think this next wave of new development that may hit the market in '28, '29, and '30 will be somewhat larger. 

I think there are a lot of things driving that. Of course, construction costs, competing against conventional multifamily, and having enough units to support amenities, which I know we're going to talk about. 

We're definitely seeing that range move more toward 120 to 180 units rather than closer to that 120 range. I think that's going to continue to grow, again depending on how deep we think the markets are. 

As it relates to unit mix, this goes way back. When Zonda got into this business, we got into it because we acquired a business that was already analyzing active adult since the '80s. Annie Gerard, I have to tip my hat to her. She is one of the pioneers in analyzing this product type, and she bequeathed a lot of her knowledge to us. 

She always started with a 60/40 mindset and then looked at the market to understand it. Looking at those waterfalls and asking, "Are we going to see more single people coming here? Are there already renters here?" If so, then they're familiar with renting. They're living in a 600-, 700-, or 1,200-square-foot two-bedroom. 

Where are we going to get our primary target market? That is going to help drive that unit mix. 

If we are going after more active adults who are coming to be near their children, maybe we would do more two-bedrooms. Those are the kinds of aspects that we really drill down and look at. It is very market-specific. 

We also focus a lot on... I always tell people, when you walk into a comparable community and ask, "What's your best leasing unit?" you really need to tweak that question. The question should be, "At what rate?" 

Because I'm going to look for where supply and demand are reflected in the price. We're going to look at where pricing is robust, whether it's within an individual community or across a market, and that's going to tell you where the demand is. 

That's where we really focus, and that's a big part of any unit mix analysis that we do: finding those sweet spots within those 100-square-foot increments and helping understand what's doing well in the market and what's challenged in the market. 

Caroline Clapp: Yeah, that's amazing. That's really great information. 

So we've talked about unit mix. Let's get into amenities. 

I'm putting a slide up now that shows the top 10 active adult amenities within the communities tracked by NIC MAP. They're very much focused on lifestyle and wellness. The top ones include fitness centers, pools, clubhouses, and an activities coordinator, or a lifestyle engagement director, as an example. 

What does the performance data and the ROI say about which amenities should be built or not built? 

Kimberly Byrum: Right. Well, first off, if we are competing in a market where there is a robust conventional multifamily pipeline, the amenity wars are real. 

Kimberly Byrum: And if we are trying to compete with someone who's looking at both conventional multifamily and active adult, we need to have everything they have, plus that amazing coordinator or programmer who's going to activate the space. 

To me, it's extremely important, and the answer is yes, we need amenities, and those are definitely driving rental rates. 

Caroline Clapp: Mm-hmm. 

Kimberly Byrum: People may not use every amenity, but with that activities coordinator, they are used more in active adult than you might see in conventional multifamily. 

When we do our research, we drill down even a little further. When you think about community amenities, 50 to 60% of the value in that package is in the clubhouse. The programming within that clubhouse is extremely important. Like I said, if you think about that pie chart, that's 60% of your value in the rent. 

One of the things that pops up, and it's very simple, is that coffee area. People like to come, sit, and get their Keurig coffee or their Nespresso coffee during the day. Of course, that also creates a social environment. They're talking to the staff as well. 

That area is one of the highest-value amenities that we see in our research, that coffee and kitchen area. 

When you think about the site plan, that's another 20%, call it, of your value, whether that be a pool, depending on what part of the country you're in, walking trails, outdoor seating areas with fire pits, things of that nature. Those are all taking advantage of the site plan, and that's also a very robust component of your overall rent ROI. 

Finally, kind of evenly split are the pet amenities and the security amenities. I know we don't sell security, but it's extremely important, especially when you're going after someone who's coming from a home and they're just not sure. Having that level of security, whether that be gated access or building access codes, is extremely important with all renters, not just active adult renters. 

Overall, those are high-value amenities as well. 

Caroline Clapp: That's great. A good overview of the amenities that are needed. 

Our third episode in this series is going to cover programming as well, and it does leverage the must-have amenities. 

You started to get into rents, so let's get into rent premiums. NIC MAP reports a median of all the average monthly rents across markets of almost $2,000 per month. Rent premiums are often cited as being 10 to 20% over conventional multifamily. Does that sound correct to you? 

Kimberly Byrum: Yeah. But it's a little bit of an apples-and-oranges comparison because, since we don't do studios very often in active adult, when you compare just the rate, it can be influenced by a smaller average unit size at the conventional level. 

But yes, when we're underwriting, we would expect to see some sort of premium, certainly for the programming. 

I've challenged my team, in fact, when looking at competitors, especially active adult competitors, to look at their calendar. What value are they providing through their programming? That can really help even an older community achieve higher rents in a market because of what they're doing programming-wise and what they're offering their resident profile. 

That's something we look at in active adult. Overall, I would say there's no hard-and-fast rule, but we would definitely expect to get some level of premium for the programming that we're seeing. 

Caroline Clapp: Yeah, that's great. 

We're coming near the end of our time here. You gave a lot of great information, data, and advice for developers, but maybe one key takeaway. What's the most common mistake or lesson learned that a developer should know about market research? 

Kimberly Byrum: Well, I've found that nobody wants to hear that their baby's ugly. Everybody is very proud of their baby. 

But I have found over the last few years that people are pretty realistic about the pluses and minuses of their site selection, and that's obviously very important. 

I do believe, and we've had these discussions at NIC in our committee meetings, that there is a little more geographic bias within that 55-plus renter cohort than you may see in a Gen Zer. 

Many times we've analyzed communities that are on train tracks. Gen Zers don't even really think about it. Millennials don't really think about it. But something that used to be the dump that's now been renovated into something nice, those geographic biases could still be there for that active adult site. 

So that's definitely something to think about as it relates to site selection. 

Probably first and foremost, though, everybody wants to make everything formulaic. When we talk about active adult and think about all of the data attributes that make a good active adult community, it's not a checklist. It's not a linear process where you say, "I've got this, I've got this, I've got this. I don't have this, so throw it out the window." 

It's all of those things working together that make it successful. It may not be a perfect site, but it may have many of the attributes that push it up. 

So I would caution people not to get too linear, don't think your baby's the prettiest baby in the room, and be as analytical as you can, but also use reason.
 
Caroline Clapp: Yeah, that's great. That makes a lot of sense. 

Looking ahead, as the sector matures and we get more performance data, how do you see the research and underwriting standards evolving? 

Kimberly Byrum: Oh, I think it's just going to get better and better. We're going to understand a lot more about what motivates this age of renter. 

All of the things that NIC is doing are amazing and really add value to the underwriting process. Ideally, I would love for the industry to embrace more sharing with third-party research teams so that we can build a robust history. 

I would hate for us to get fragmented the way the senior housing market can be. It's very hard to get rental rates and transparent pricing without a site visit and wasting people's time by making up a big story. 

I would love to see our sector be a lot more like the multifamily sector as it relates to data availability. That's probably my prayer: that we stay transparent, stay open, and become more like conventional apartments, with those added benefits that meet the needs of this age group. 

Caroline Clapp: Yeah. 

I've heard you talk a lot about that, as well as having very fresh data. 

Kimberly Byrum: Yeah. It can't get stale. 

Caroline Clapp: That's right. Yeah. Multifamily is very fast. 

Kimberly Byrum: Yes. They don't change rents very often in seniors housing, but multifamily, that's a daily change. So we're probably somewhere in between because the sales process is too long, and if your rents change too much, you're going to upset people. But there's somewhere in between where we want to be in this sector. 

Caroline Clapp: Mm-hmm. Yep, yeah. 

The last slide I'll put up here shows all the active adult resources that NIC and NIC MAP have put together with our data and with people like you who serve on our committees. 

Is there anything at Zonda that you think developers should use as part of their research? 

Kimberly Byrum: We have a couple of amazing experts who focus on the for-sale side of active adult, which is something that I look at. That is a sector that is growing like hotcakes and selling at twice the pace of new-home master-planned communities. 

There's a lot to be learned from that for-sale side and what they're doing. I know they're very focused on wellness amenities, spaces, connections, and all of those things. 

That is an area where you could probably get a Ph.D. just by studying what they're doing on the for-sale side, which is the natural progression from moving out of a house and buying another house. Then hopefully someday we can get them into the rental market when they're tired of all the maintenance and other homeownership responsibilities. 

Caroline Clapp: Yeah. That maintenance-free lifestyle. 

Okay. Is there anything else you'd like to share that you're most excited about? 

Kimberly Byrum: We're thrilled that this subsector has gotten so much interest. We do see a lot of traditional multifamily developers interested in this space. They're kind of kicking the tires a little bit. 

For anybody who's exploring this sector, check out those NIC resources. Get smart about this business. 

Anytime we've had panel discussions or similar events, we consistently hear that this operates much more like a multifamily deal for a targeted demographic. 

So it's a nice crossover, and I think we've seen many multifamily groups move into the space. 

Caroline Clapp: Yeah, that's a great point. We're trying to educate developers, new entrants, and also the cities and towns where we're trying to build these communities. 

There are lots of great resources to help people understand the nuances between active adult and conventional multifamily. 

Great. Thanks so much, Kimberly. Lots of great data. 

Thank you to our listeners for joining this episode of NIC's Active Adult Podcast Series. You can find additional podcasts on our website, nic.org, or wherever you listen to your podcasts. 

Thank you again to our guest, Kimberly Byrum, Managing Principal, Multifamily, at Zonda Advisory Group, for speaking with us today about active adult in this episode on Data-Driven Market and Product Selection. 

And thanks again to Treplus Property Management for sponsoring this episode.