Since peaking in mid-2015, the seniors housing and care sector has slowed to its most sluggish pace since the middle of 2013, totaling $2 billion in acquisitions, according to an October 24, 2016 article on The National Real Estate Investor (NREI) Online. This sector includes independent living, assisted living, memory care and nursing care, according to the National Investment Center.
Author Beth Burnham Mace, chief economist and director of capital markets outreach with National Investment Center for Seniors Housing and Care, reported on whether the slowing transaction activity in the senior housing market is a blip or the new normal.
Single properties are making up the bulk of seniors housing and care transactions, while the $1 billion and more deals have dwindled in recent quarters, according to NREI. This lack of mega-deals is also occurring in the commercial real estate sector, which makes one wonder if the slowdown is reflective of seniors housing. Another factor that could be cooling the fire for seniors housing and care properties is price. High price points might be keeping some buyers on the sidelines, according to Mace.
But there do seem to be plenty of buyers waiting to invest in commercial properties — buyers including pension funds to private REITS, according to NREI.
So is the slowdown in activity a temporary change or the long-term trend? Mace reported some of the capital on the sidelines will be allocated to seniors housing and care simply because the sector can’t be ignored. It’s growing and is considered by some to be a core real estate asset class, she wrote.
Today, seniors (the 55-and older age group) make up more than a quarter of the population in the U.S. And the population change for this demographic is higher than the percentage change for all Americans. Taking a closer look: the senior population is expected to increase more than 27% this year, according to an October 26, 2016 article on GlobeSt.com, by Jennifer LeClaire.
The impact on real estate could be an exodus of aging baby boomers from large, suburban single-family homes to lower-maintenance homes in urban and other areas that have easy — even walking — access to things they see as important.
The result could be mighty big demand for condos, apartments and small, easy-to-maintain homes, according to GlobeSt.com.
One product poised to take the senior market by storm is the age-restricted lifestyle apartment rental, or active adult lifestyle apartments, according to a recent article from John Burns Real Estate Consulting.
Author and John Burns Real Estate Consulting Manager Jeff Kottmeier pointed out that people 65 and older (a market that has blossomed from 2.2 million in 2005 to 3.5 million in 2015) are choosing to rent because of the flexibility and freedom it offers, but they have product type demands.
Senior renters, he wrote, appear to be looking for rentals that are close to what they like to and need to do; are relatively safe and have a comfortable home design; and have a sense of community. This includes being in walking distance to shops, restaurants and more; focusing on community security; and offering lots of fun and social activities, according to the John Burns article.
Age-restricted lifestyle communities tend to command premium rental prices, compared to the general market for apartments. But, keep in mind, these properties might be more expensive to operate in order to keep up with tenant demands, Kottmeier wroye.