Seniors housing is still in the early stages of evolving into a stand-alone investment asset class. Institutional interest continues to increase significantly as managers understand the sector’s unique position relative to other real estate sectors. According to the National Investment Center of Seniors Housing & Care (NIC), the total market capitalization of the seniors housing and care property market is estimated to be $475 billion. That figure is expected to grow as the proportion of the US population over age 80 is expected to increase dramatically.
The combined components of real estate, hospitality, and needs-driven service make seniors housing a unique asset class that offers both growth potential and consistent performance. Senior housing remains a defensive asset class, relatively insulated from the volatility of traditional real estate segments. Seniors housing also offers a potential inflation hedge allowing for periodic increases to the underlying rental contracts.
The “graying of America” is accelerating rapidly, driving demand for housing to accommodate the special needs of an aging population. Sector demographics are expected to drive investment performance relative to other real estate asset classes. Baby Boomers first started turning 65 in 2011 and are now turning 65 at a rate of more than 10,000 per day. Compounding the growth in the elderly population, advances in healthcare and wellness are allowing people to living longer. If penetration rates remain static, the demand for seniors housing will more than double in the period between 2018 and 2035.
A significant percentage of seniors housing properties are owned by sole proprietors or small local companies who are limited in the efficiencies they can achieve. This makes seniors housing a sector ripe for consolidation. The top 10 owners of seniors housing control less than 25% of seniors housing units.