Last year senior housing had an incredible run. Cap rates were extremely low, occupancy levels were high and construction was also on the rise.
This has led to a concern that senior housing has hit a bubble, according to a recent Integra Realty Resources report. Some markets are over supplied right now due to a boost in construction in certain markets that is negatively impacting vacancy rates.
That might be the case for the short term, but there is plenty of upside for this commercial real estate sector’s future.
As the Baby Boomer workforce ages, more people are going to be entertaining retirement.
The National Investment Center for Seniors Housing & Care (NIC) reports that people of the age 75 and older will increase 15 percent from now and 2020. In fact, over the last 100 years the age of the average adult has increased by 30 percent. This is going to make the demand for more senior-housing development skyrocket in the next decade.
During last year’s fourth quarter, for example, there were 30,000 units under construction in the assisted-living sector of senior housing.
On the independent-living end, during the same period, vacancy rates were at 91.5 percent, the lowest seen since before the crash in 2007. With an increase in healthier lifestyles and advances in medical care that have boosted the lifespan of seniors, independent housing has become especially popular because residents can care for themselves unassisted for longer periods of time.
With that, there has become a shift in what senior-housing facilities have to offer in terms of amenities. Luxury student senior housing has become a major commercial real estate trend, namely because there are plenty of Boomers exiting the workforce who are financially well off. GRS | Corteq routinely assesses recently-constructed or renovated student housing deals in proximity to large universities, that bear little-to-no resemblance to traditional class B (if you were fortunate) and C housing baby-boomers lived in while attending college.
This had led to more amenities than senior housing has ever seen, and some of the developments seem more like resorts than the “old folks’ homes” of the past. They have spas, room service, pools and several recreational and entertainment options that were not a reality in the past. Additionally, a lot of senior housing is now in urban areas. Like millennials, which in some cases are their grandchildren, this population wants a live/work/play environment where they can walk to various entertainment and dining options.
Senior housing is to be taken seriously by the commercial real estate community. With an aging U.S. demographic that has changing needs which will help other sectors of CRE, its future is only bound to be positive. GRS Group will be riding the grey wave, providing title and assessment services as this sector continues to thrive.
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