Jeff Coyne
Director, GRS Group
(510) 962-9534
[email protected]
Seniors housing has an edge demographically as a commercial real estate property sector – a large chunk of the population is about to hit the over-65 mark. By 2030, the entire baby boomer generation will hit that mark, according to the U.S. Census Bureau.
That means one in five people in the country will have hit retirement age, and by 2035, there will be more people 65 and older than those 18 and younger for the first time in U.S. history.
Seniors housing developers are very aware of these numbers, and they have acted accordingly. In the last two years, about 24,200 independent-living units have come online, according to Marcus & Millichap’s National Seniors Housing report for the second half of the year (download here). Meanwhile, 12,500 assisted-living units were constructed over the last 12 months, and 2,400 memory care units were finished each year since 2013.
As a result, seniors housing had seen a bit of a downturn in occupancy rates over the last few quarters.
However, a recent Reis report on seniors housing first-half performance (download here), has vacancy across property types at nine percent, remaining flat quarter over quarter so far in 2018. Vacancy rates dropped in the memory care space by 30 basis points, dropping it to 8.3 percent, the lowest of all seniors housing asset types. Independent living saw a vacancy decrease of 10 basis points. The largest vacancy rate is in the skilled-nursing space, which is at 10.4 percent and experienced a 20-basis point jump during the quarter.
By metro area, the largest vacancy rate is in San Antonio, at 13.3 percent; the San Jose, Calif, area has the lowest, at 5.4 percent. The Washington, D.C. area saw the largest vacancy increase, from 7.1 percent to eight percent, while the largest decrease was in Colorado Springs, Colo., from 10.4 percent to 8.8 percent.
Though occupancy rates seem all over the place in the seniors housing spectrum, Marcus points to one figure that could spell good news for this sector of commercial real estate. Home ownership for those 75 and older is in decline and has been for the last several years. Increased housing prices keep pushing those numbers up, leading to more seniors entering housing communities or living with their children.
That, combined with an aging population, should level out fundamentals if developers aren’t over-zealous in undertaking new construction.
About GRS Group:
GRS Group is a leading provider of commercial real estate (“CRE”) services worldwide. With offices across the United States, Europe, and affiliates around the globe, GRS Group provides local market knowledge with a global perspective for institutional real estate investors, occupiers and lenders worldwide. The GRS Group team has evaluated and advised on over $1 trillion in CRE transactions.