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 value of the investment-grade seniors housing and care property market is an estimated $372 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. Over the past 10 years, senior housing properties have significantly outperformed the broader National Council of Real Estate Investment Fiduciaries Property Index (NPI). On a 10-year basis, total returns for seniors housing exceeded apartment returns by over 400 basis points, hotel returns by 656 basis points, and retail returns by 257 basis points.
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. If penetration rates remain static, the demand for seniors housing will more than double between now 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 just 13.2% of seniors housing ownership.