■ In recent years, the anticipated demand from the large and influential baby boomer age cohort has led to the increase in supply at colossal levels. Builders of assisted living have overestimated the current demand and timing for assisted living properties. The oldest baby boomer turns 74 years old on January 1, 2020 and is seven to eight years away from the need for assisted living.

■ NIC data shows that senior living supply is up more than 120,000 units since 2015.

■ Assisted living occupancy nationally is at 85.4% in Q32019. This is the lowest level since NIC began reporting occupancy in 2005.

■ In markets where there is excess supply, we are seeing occupancy compression and loan delinquencies.

■ CoStar estimated occupancy rates for active adult properties at around 95%.

■ A number of geographical areas in the country experienced intense seniors housing construction as we exited the Great Recession. Although Baby Boomers will not hit the seniors’ market for another decade or more, the long-term demographics attracted new competitors creating an overbuilt market.

■ Medical office, hospital, and multi-family developers, all chasing the senior tsunami, entered the seniors-housing field in droves. Often, they fail to understand the unique dynamics of senior housing operations. The focus of many developers has been too heavily on the physical plant of the building, instead of the operations. These new entrants have erroneous perceptions of the market – a “build it and they will come” mentality.

■ Many properties were built with expensive resident amenities which raised resident rates to the top of the market. However, most seniors are not able to afford what is being built or offered over the last five years or the seniors and their adult-children influencers decide to select a community that is under their budget. We find that adult children, who are the deciding factor for their parents, tend to be concerned with their loved one outliving their financial assets. Therefore, they tend to select a community that is more affordable and within or under their monthly budget. The high-end market was, and is, being tremendously overbuilt. Additionally, the current assisted living resident population, the Silent Generation, was born in the Great Depression and they have moderate roots.

■ Overbuilding, particularly in assisted living and memory care (Alzheimer’s), stems in part from a lack of zoning obstacles and low levels of capital needed to execute. Typically, in putting up any kind of commercial real estate, local zoning and planning act as natural deterrents to overbuilding. With senior developments, government is not a screening device. Seniors housing often is considered a positive for most communities, since the elderly make few demands on local municipal services, such as schools, but their presence increases the populations tax base. Zoning boards and city councils often welcome seniors housing developments with open arms.

■ The typical memory care and assisted living facility consists of 40 to 80 units and $9 to $16 million in total cost. These developments have been relatively easier to finance with regional lenders and a country club equity raise of $2 to $4 million.

■ The overbuilding has lengthened absorption in many markets. As fill-up timeframes are extended, more working capital is required to pay operational losses and interest payments.

■ Additional factors contributing to declining occupancy and distress include a later-than-expected move-in age, delayed retirement, affordability and technological advances.