October 3, 2018
The “silver tsunami” of baby boomers set to enter the seniors housing market over the next decade has real estate developers and investors jostling to establish themselves in the sector to take advantage. According to JLL’s Mid-Year 2018 Seniors Housing Investor Survey, 57% of respondents indicated seniors housing cap rates will compress relative to other asset types, a sign that the sector is drawing investment and competition for product is heating up.
Despite new supply depressing occupancy and a slight decrease in transaction volume year-over-year, seniors housing is being boosted by strong demographic tailwinds. According to the U.S. Census Bureau, by 2035 all baby boomers will be over the age of 65 and the 65-plus population will outnumber the population under age 18 for the first time in U.S. history.
JLL’s Charles Bissell says, “It’s clear that many investors are recognizing the long-term potential of the seniors housing sector, and are seeking to establish a presence in the sector now, even though boomers will not start hitting 80 until 2026. The market continues to become more mainstream, as developers choose strategic infill locations that appeal to a wider swath of potential investors.”
Independent and assisted-living facilities continued to be the most sought-after assets, with 72% of respondents saying they were very or extremely desirable. Free standing independent living facilities were respondents’ second favorite with 58%, ranking them as very or extremely desirable. Freestanding nursing care facilities and entry-fee CCRCs ranked last with 71%, and 66% of respondents ranking them as not so or not at all desirable, respectively.
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*Pictured Devries Place, Milpitas, CA by HKIT Architects