Cambridge Realty Capital President Andrew L. Erkes has come up with 8 trending reasons why he believes the senior housing/healthcare sector will continue to be more attractive to investors over the next 10 years:
Demographics. The Baby Boom generation will continue to create demand for senior housing. By 2030, all Baby Boomers will be 65 or older, with considerable increases in the number of the typical 85-year-old that utilize long-term care. Meanwhile, the population’s longevity continues to expand, with more individuals living longer into their nineties.
Commitment. The United States government appears to be committed to a social policy that takes care of seniors. Several programs during the pandemic provided government funding specifically for long-term care. For many decades, Medicaid and Medicare entitlement programs have survived various political challenges and should continue to prevail and persist in the years ahead.
Capital Support. Institutional capital has studied senior housing for many years and increasingly finds itself attracted to the asset class. Mostly, the focus has been on memory care, independent living, and assisted living properties. Simply, the more senior housing is observed to be performing like commercial real estate, the more attractive it becomes to commercial investors.
Resiliency. Senior housing continues to demonstrate that it is very resilient to changes in the economic climate, mainly because senior housing demand is solely based on an aging population and demographic changes. As a result, senior housing performed better than any real estate asset class during the Great Recession.
Low-Cost Setting. It has repeatedly been demonstrated that the cost of living in an assisted living facility or recovering in a nursing home is less expensive than other care settings, having your children take care of you, continuing to live in your own apartment or house – or any other similar arrangement.
Performance. Senior housing on a micro basis – and commercial real estate on a macro basis – have continued to perform considerably better than the bond market or stock markets, which hasn’t been lost on either the private equity providers or major institutional investors. The expectation is that new construction will continue to perform well, with more capital attracted to the sector.
Status Change. Currently lumped with niche product sectors like hospitality, student housing, and self-storage, senior housing will move beyond these niche products to become a “core real estate” segment. This development should further enhance the industry’s appeal to investors.
Optics. With strong demographic tailwinds at its back and the pandemic largely behind it, senior housing should continue to attract more and more capital to the sector. The industry’s image and prosperity levels will continue to improve as more practical and innovative products come onstream.