Senior housing has huge market potential and investment value in America. The aging population is driving huge demand, but supply is limited due to high development costs and long development cycles. Investors can invest in senior housing REITs, funds, or directly acquire senior housing properties. Independent living, assisted living, memory care, nursing homes, and CCRCs are the main property types. Major players like Brookdale still suffer losses due to intense competition. But in the long run, senior housing should provide stable returns as demand outpaces supply.
The aging population will drive strong growth in demand for senior housing
The number of Americans above 85 is expected to grow from 6.7 million in 2020 to 9.8 million in 2030. But currently there are only 2 million senior housing beds in major metro areas. New construction is not keeping pace with demand growth due to construction costs and lack of financing. As the baby boomer generation ages, demand should continue to outstrip supply.
Developers face challenges in bringing new senior housing supply
Senior housing construction has dropped drastically due to the pandemic. Financing has dried up as occupancy declined. Land and material costs have also jumped. All this has made development prohibitively expensive. Local regulations also constrain new projects. These constraints limit new supply despite booming demand.
Investors can target various types of senior housing properties
Main options are independent living, assisted living, memory care, nursing homes, and CCRCs. Independent living provides basic services for seniors still able to live independently. Assisted living offers help with daily tasks. Memory care serves seniors with dementia. Nursing homes provide skilled nursing services. CCRCs offer the full spectrum. Investors can also buy REIT stocks focused on senior housing.
Intense competition has hurt profits for senior housing operators
High development costs have attracted lots of investment over the past decade. But now the industry suffers from oversupply and intense competition. Occupancy has dropped since 2016 per NIC data. Major players like Brookdale continue to report losses. But the long-term demand outlook remains positive.
Senior housing in America has excellent potential for investors. Demand is booming based on the aging population while new supply is constrained. Investors can target various property types and REITs. But they need to be aware of risks like overbuilding and strong competition.