As the construction of senior housing communities continues at a steady space, some senior housing providers have begun to take a unique approach to developing new communities. Specifically, in addition to using market research to determine the best places to build, they are also increasingly looking at zoning laws to help them decide where they should develop a new community. And surprisingly enough, many of them are more interested in areas that have challenging zoning laws that make it more difficult to build senior housing facilities than in areas where the laws are more conducive to building a new facility. Providers who are following this strategy are doing so for a few reasons, including low interest rates. Today’s low rates help reduce the cost of development and can lower the risk of incurring a tremendous loss if something goes wrong with a new senior housing facility. Before interest rates begin to rise, senior housing providers and investors who are interested in obtaining inexpensive capital should contact the successful Chicago-based financing firm Cambridge Realty Capital to learn more about the many different financing programs that it offers for acquisitions, joint ventures and other purposes as well.
Reduced Competition Can Help Attract New Development
In addition to low interest rates, another reason some senior housing providers are increasingly looking to build new facilities in areas with strict zoning laws is because of the reduced competition in these areas. Furthermore, as senior housing construction ramps up across the country, areas with strict zoning laws are less likely to become oversaturated with senior housing communities. For example, in Houston, Texas, it is not uncommon for providers to be able to identify a location and build a community there within a year. And while at first this might seem great to a provider, the excitement it feels at quickly being able to build a new facility can suddenly dissipate when it realizes that other providers can do the same thing and, within just a few years, it is now surrounded by numerous other communities that it has to compete against each and every day for new residents. This is less likely to occur in places with strict zoning laws because of the high barriers to entry.
While there is the potential for less competition and greater profits in areas with strict zoning laws, it is also important to remember that these rules increase the amount of time it takes to build communities in these areas and the cost of doing so as well. Furthermore, even after expending a considerable amount of time and money on a project, there is still no guarantee that a provider will be allowed to build a facility where it would like to because of these rules. For example, in some parts of the country, providers need approval from the town’s residents before they can begin building there. Most providers tend to shy away from these areas because of the risk that the town will deny them approval and they will have spent a lot of time and money on a project for nothing. However, if they are able to get approval from the townspeople then it becomes a huge win for the provider because not only is it able to build a facility in a place with little, if any competition, but the townspeople now have a stake in the facility as well and will want to see it be successful.
As construction for senior housing facilities continues throughout the year, it will be interesting to see if more providers follow this strategy and attempt to build additional communities in highly regulated areas such as California and New Jersey. While building in these areas is challenging, today’s low interest rates make it easier to attempt now than in previous years when interest rates were higher. Accordingly, senior housing providers and others who are interested in obtaining capital for growth or other purposes should continue to look to Cambridge Realty Capital for their financing needs.
