Senior Housing: A Growing Real Estate Market
Baby boomers have been impacting the American economy ever since moms and dads brought home 3.4 million of them in 1946, following World War II. Between 3.8 and 4 million more were born every year after that until 1964. Every day now, 10,000 of them celebrate their 65th birthday, and according to the U.S. Census Bureau, the 65 and older population will reach 75.5 million by 2030. The 2018 Emerging Trends in Real Estate report from PwC states that, “demand for more senior housing tops the list of all residential segments as present inventory does not meet the needs of this group…” These statistics are a large part of the reason why senior housing has become popular among developers and investors.
Senior Housing Market Segments
They may all be called baby boomers, but this population includes a wide range of people with diverse physical abilities and health needs. Therefore, different types of senior housing are necessary to meet demand.
The three main categories of senior housing are:
Independent Living—Designed for healthy, active residents that are over the age of 55. These properties, which may be single-family homes or apartments, often include amenities such as hotel-style services and social gatherings.
Assisted Living—These are licensed facilities that offer healthcare assistance as well as personal support services including meals, transportation and laundry.
Skilled Nursing—Also licensed, these facilities provide 24-hour care for chronic and short-term conditions. Memory care can be a special care unit (SCU) in a skilled nursing center that provides safe living for people with dementia and Alzheimer’s.
What Drives Demand for Senior Housing?
“The projection of an increasing population of seniors is the basic driver of demand for additional senior housing in many categories,” says Bill Bush, Managing Director of the HSM Multifamily Development Group.“Although Texas leads the country in all development at the moment, the demand for senior housing is increasing everywhere.”
And what is driving seniors to demand the various categories of housing? Two main factors: need and want. As mentioned earlier, there is a wide range of health conditions among the boomer population. Therefore, some need assistance with personal and healthcare services as they age.
And even if they won’t need assisted living or skilled nursing for two decades or more (the average age of people moving into assisted living in America is 80) they still have an indirect impact on demand because many have parents living in these facilities.
The want side of demand appears among active seniors who enjoy living in a community of their peers where there are friends and activities nearby, as well as the convenience of fewer maintenance responsibilities and possibly a meal plan. Thus, baby boomers have a direct impact on the growing popularity of properties for the 55 and older set.
In North Texas especially, employees that have relocated with a corporate move are often eager to have their parents join them. Places such as The Enclave at Brookhaven in Farmers Branch, a garden home development, and Charterhouse at Carrollton—a senior living community with 147 homes in an urban-style tower and cottage units—offer proximity to family, healthcare, entertainment, shopping and restaurants. Parents can live close by and still enjoy their independence.
A Look Ahead
Population statistics and lifestyle trends prove that demand for senior housing is set to increase for the foreseeable future. As a result, investor interest is growing, too. What should investors look for in a community that will provide the least risk and a strong return? Here are some suggestions:
- Consider local market data. Know how many competitors are in the area and how many more are planned. What are the demographics of community residents? Healthcare services—including a hospital—shopping and entertainment should be nearby.
- Look at the design. The institutional nursing home of a mere 30 years ago is not acceptable today. Baby boomers, their parents and their children want a place that feels like home. The atmosphere should be at once attractive and therapeutic. Look for natural touches such as a garden courtyard. In addition, there should be quality-of-life amenities like a hair and nail salon, a café, and even a theater for movies or live entertainment.
- Assess the technology. Baby boomers may not have grown up with technology, but they are devoted users today. A Wifi Internet connection is a necessity. In addition, state-of-the-art technology should be in place for everything from monitoring residents’ health to ensuring security.
- Know the operator. Unfortunately, not all senior housing operators are created equal. Some, seeing the possibility of profit, jump in without understanding that this industry is a complex mosaic of skilled professionals, an attractive and functional facility, and a detailed plan for success in the long run. Before investing, check the track record of the community’s operator.
In conclusion, there are several solid reasons for investing in the senior housing market now and in the future. And while supply has certainly been increasing, it will likely continue to be outrun by demand as the U.S. population ages. For more information about the market in your area, contact a senior housing development specialist.
The information contained in this article is general in nature and should not be construed as financial, tax or legal advice. As with any financial or legal matter, consult your tax advisor and legal counsel.