Senior housing is being transformed from a niche asset class into a mainstream investment.
The National Investment Center for the Senior Housing & Care Industry (NIC) estimates that between $250 billion and $270 billion is invested in the senior housing and care market. By 2030, the number of seniors in the U.S. is projected to grow by 5 million people.
In this article we’ll take a look at why the demand for senior housing is growing, and how investors can benefit from senior housing investments.
Why demand for senior housing is growing
Baby boomers, the children of today’s assisted living residents, will have a significant influence in the growing demand for senior housing. Today, about 15% of the U.S. population is 65 years or older. By 2030, 74 million people – or 21% of the people in the U.S. – will be over the age of 65.
Senior housing can be classified according to the level of healthcare services provided:
- Senior apartments
- Independent living
- Assisted living
- Memory care
- Nursing care
Baby boomers are actively moving into 55+ active living facilities such as senior apartments. As they continue to age, there will likely be natural progression to assisted living, memory care, and nursing care.
Benefits of senior housing investments
Senior Housing News, the leading source for news and information in the senior housing industry, recently listed “11 Reasons Investors Are Flocking to Senior Housing”. Benefits of senior housing investments include reliable returns, consistent cash flow and a growing tenant base.
In fact, over the next five years, the number of people in the U.S. who are 75 years and older will increase by 5 million, creating a 21% increase in the number of prospective senior housing residents, according to the First Half 2019 National Seniors Housing Report by Marcus & Millichap.
Capitalization rates for Class A senior housing property in the independent living, assisted living, and nursing care segments range from 6.6% to 10.9% on average, according to CBRE. The firm’s Summer 2019 Seniors Housing & Care Investor Survey notes that 62% of survey respondents plan on increasing the size of their senior housing investments over the next year.
Where to find senior housing investments
The demand for senior housing can be found in all parts of the country, from major metro areas to smaller secondary and tertiary markets. However, California, New York, and Florida should see the strongest demand for senior living facilities in the upcoming years due to their large population bases and a high concentration of seniors.
CrediFi has data on thousands of properties in the senior housing asset class and subclasses including assisted living, skilled nursing, and memory care centers. Commercial real estate practitioners can obtain reports on up to 30,000 properties with detailed ownership and loan information.
Keep an eye out for part 2 of this series...