Senior Housing Demand Slows
Oversupply is not a word you would use for today’s real estate market, but there is one sector that may be tipping in that direction. The demand for senior housing has been going through somewhat of a lull, but that’s not expected to last very long.
It’s no secret. Baby Boomers are finally growing up. The boomer generation runs from 1946 to 1964, with the oldest boomers hitting retirement age 6 years ago. Those boomers are now 71 years old which is not generally old enough for senior housing. But as of 2015, there were some 75 million boomers, so there’s a huge number of them heading in that direction.
As reported by the National Real Estate Investor, there’s been a lot of recent senior housing development, and the National Investment Center for Seniors Housing & Care or NIC found that supply is outpacing demand. NIC tracks the top 31 senior housing markets.
That could make it tough on developers who need to fill all those new units. Ben Burke of CA Senior Living says: “There’s potential for the developer who doesn’t capitalize on a deal to find issues with slow lease-up. We are starting to see that type of stress occurring.” But he says: “Developers in this sector need to be able to weather a slow lease-up due to these short-term supply issues.”
Lag Time Will Be Temporary
But that lag time is not expected to last long. The latest building boom for senior housing began several years ago. It appears to have gotten slightly ahead of itself last year through the beginning of this year. But Charles Bissell of the commercial real estate service firm JLL told NREI that it’s already starting to pick up steam again. And he says that luxury senior housing is showing the strongest demand. And many of those high-end projects are attracting big money from investors.
Bissell also acknowledges the build-up of inventory and the risk of slower occupancy rates. He points out that the oldest boomers won’t turn 75 until 2021, and many of those people won’t be ready yet for senior housing. Of course, we all want to remain as independent as possible for as long we can. And due to healthier lifestyles, and longer lifespans, many boomers may avoid those kinds of care facilities.
Based on that, Bissell told the NREI that we may not see a “huge” increase in demand for senior housing until 2026. But you can bet that when the time arrives, the demand will be huge. So timing is important.
Demand Will Double in 18 Years
Bissell says told the NREI: “The demand between now and 2035 will double.” He says: “The huge increase in demand will require a lot of capital, and demand for quality operators. That makes it a good sector to investigate and get up to speed on.”
Senior Housing Investment Opportunities
The National Real Estate Investor says that for now, lenders are screening projects more carefully. It says that lenders are more likely to back projects that provide various levels of care for seniors — such as those that offer independent living, assisted living, memory care, and possibly nursing home care.
And there are other kinds of investment options in the senior housing sector. According to the Senior Housing News, 97% of the people taking a poll on health care real estate said they would like to purchase a medical office building, this year. Ambulatory surgery centers were a close second, followed by wellness centers, free-standing emergency departments, and assisted living facilities. The bottom half of the list included inpatient rehabilitation hospitals, skilled nursing facilities, long-term acute care hospitals, and psychiatric hospitals.
The National Real Estate Investor put together a list of busiest markets. Boston topped the list followed by New York, Houston, Chicago, Atlanta, Minneapolis, and Dallas.
Disclaimer: The information provided on this page is for educational purposes only. Real Wealth Network makes no warranty or representation as to the accuracy, completeness or reliability of this information. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Real Wealth Network be liable to you or anyone else for damage stemming from the use or misuse of this information.