For the second half of the 20th Century, baby boomers—just by the sheer size of their demographic—drove a lot of decision making in this country. Now that this generation ages and retires, they are having an impact on how the senior housing space will respond, albeit in sometimes unexpected ways.
Looking for more insights on this sector? There’s still time to register for next week’s 11th Annual Chicago Senior Housing Real Estate Conference.
The baby boom phenomenon is well documented: in the post-WWII era, on the back of a strong economy, the birth rate in the U.S. skyrocketed between 1946 to 1964. At 73 years old, some of the oldest boomers have already entered the senior housing marketplace. The youngest, at 55 years old, are still years away from retirement.
All this means that the relatively robust senior housing sector that we’ve seen recently is only going to flourish over the next few years as more and more members of this generation age out of the workforce. The 55+ communities will be the first to grow, followed by independent living communities and then more acute continuing care facilities.
However, there’s a catch. The baby boom was followed by a baby bust. Following the mid-‘60’s, the birthrate in this country fell to rates below even those of during the Great Depression. All this means that, for those with a longer view of the senior housing sector, there may be incredible demand followed by a significant dry spell.
“We’re going to have a tremendous need for housing for quite a few years. And then we’re potentially going to need less housing for seniors following that, just because of the math,” said Mark Myers, managing director, Walker & Dunlop. “We may have to come up with some creative ideas as a country to address the fact that we’re going to need a lot of housing for a while, but then not as much in the next generation.”
Rather than tearing down buildings in 30 years, it’s possible that one of the forms of delivery will be to take conventional apartments and convert them to 55+ for a time. Then when there’s more of a need for younger people and not as much of a need for seniors, convert them back to market rate multifamily.
“Once you build a property and spend $40 million on it, you’re not looking to have it be viable for 20 to 25 years,” Myers said, “you really would love for it to be viable for 50 years or more.”
Currently, the average age of senior housing residents in the U.S. is 84 years old. However, only about 10 to 12 percent of Americans that age and older take advantage of independent assisted or nursing care, depending on the marketplace. All this means that demographics aren’t enough; the senior housing sector can benefit—as can the seniors themselves—through better marketing.
“One of the challenges for seniors housing is to convince more of the people who need it to take advantage of these services,” Myers said. “Rather than an assisted living facility capturing, say, 30 percent of the occupancy from the nursing home down the street, it would be better for seniors and for the industry as a whole if the occupancy came from new people taking advantage of a new building rather than draining occupancy from a competitor.”
Walker & Dunlop has financed nearly $5 billion in senior housing and healthcare transactions in the last ten years—proof positive that this is a strong segment of the commercial real estate industry. Those who are tapped into the minutia of the asset class can take advantage as it grows over the next few years and evolves after that with changing demographics.
There are still spaces available for the 11th Annual Chicago Senior Housing Real Estate Conference, to be held next Tuesday, November 5th. Reserve your spot now.