Today, many boomers are caring for their aging parents. Senior housing is already a big business under the present circumstances.
But by 2030, ALL baby boomers will be over the age of 65. Soon, those boomers will need specialized care for themselves. That’s the BIG wave coming, and it’s creating a HUGE opportunity for investors.
We often say, “look at the numbers and the numbers will tell you what to do.”
U.S. Census statistics show that by 2034, there will be 77 million people over 65 and just 76.5 million under 18.
For the first time in history, the elderly population will outnumber the youth.
And what is one of the major issues facing this older demographic? A lack of suitable housing to accommodate them.
The numbers prove this is an enormous growth industry. This shift is undoubtedly creating a HUGE need … And an incredible opportunity for real estate investors.
So, what’s a savvy investor to do? Get in contact with Vincent Companies and start identifying private offering opportunities to invest in.
Have you wondered what the supply and demand of new senior living units looks like? How about operating costs related to rent increases? Yeah, us too. It’s so important that we literally have team members researching data and statistics constantly, just to make sure we remain on the cutting edge of the industry. With that said, Marcus & Millichap is one of the national resources we rely on for valuable information. In a recent report, they provided some key data regarding supply and demand as well as rent increase statistics. The following is a summary of their findings.
Occupied Units Reach a New Record High
Reduced supply and increased demand trends enhance the industry’s outlook. Reasons for optimism abound in the senior housing sector, despite a persistent labor shortage and operational cost pressures. According to NIC Map® Data Service, the sector capped off 2022 with the largest number of occupied units in history. This is a testament to the care-based services that senior housing offers, in addition to social elements that many older adults seek after being in isolation. Meanwhile, a resurgence in demand has coincided with a slowdown in construction. Inventory growth during 2022 was the slowest in nine years, and almost 20 percent fewer units were underway entering 2023 relative to the five-year annual average preceding the pandemic. This confluence of returning demand and descending development, paired with longer-term tailwinds from an aging baby boomer cohort, supports a more upbeat sector outlook.
Alignment of construction and demand is favorable. In response to the pandemic disruption, fewer senior housing projects were proposed in recent years. Now, builders are factoring in higher borrowing costs as well, resulting in a small construction pipeline for 2023 and likely the next few years. The number of units underway in the U.S. has fallen in 12 of the last 16 quarters heading into 2023.
Rent Acceleration Helps Relieve Operating Cost Pressures
Attractive compensation to draw workers amid labor shortages, among other property and technology upgrades, has increased operator expenses. Last year, wage growth in senior housing surpassed 8 percent, which almost doubled the pace of the overall labor force gain. Wage pressures should begin to abate if the employment market softens and fewer alternatives are available to job seekers; however, broad-based inflation will continue to weigh on margins. To keep pace, senior housing rents across levels of care have been rising at a heightened pace. During 2022, all four senior housing segments logged annual rent growth above 4 percent, a decade-plus record within each type.
Source: Marcus & Millichap
Discover the potential benefits of investing in local apartment buildings, senior living communities, and edge data centers. Build wealth, create income, and add diversification not related to the stock market.