Senior Housing Building Boom: Too Much Too Soon?

I am part of a very substantial population of the United States known as Baby Boomers. According to the U.S. Census Bureau, 76.4 million American children were born post-World War II, between the years 1945 and 1964, making up almost 40% of the American population. As much as we would love to age in place, the fact is that if we see 80+ years old, we will need some sort of help with Activities of Daily Living, and the cold, hard truth is that a lot of us will receive that help in some sort of assisted living community.

It’s no wonder that many real estate developers are banking on building for a significant niche market. Home and commercial real estate building in 2014 point to a post-recession recovery. However, are those developing housing for the elderly building too much too soon?

Analysts say that a glut in the supply of senior housing is destined to hurt hurt health-care real estate investment trusts (REITs). Bloomberg News reported that the jump in supply is forecast to cut growth in senior-housing net operating income to 1.8 percent in 2015 and 1.4 percent in 2016 from 3.3 percent this year, according to Green Street Advisors Inc. These projections have translated into a 17 percent fall in the Bloomberg health-care REIT index during the last 12 months.

Brookdale Senior Living Inc. (BKD:US), is buying competitor Emeritus Corp. (ESC:US) for about $1.4 billion, Green Street Advisors told Bloomberg, making it the biggest owner of senior properties, with 1,161 senior care facilities in 46 states.

While the supply of senior care communities is increasing, the over-85 population is projected to increase to just 7 million by 2020. Senior housing won’t be in full swing for a few more years, when the nation’s “oldest old” could number as many as 31 million in 2050, although Jacob Gehl, managing director and founding partner of Blueprint Healthcare Real Estate Advisors, a brokerage and advisory firm in Chicago, told Bloomberg that peak demand is projected to be 15 to 20 years away.

It will be interesting to see how these new properties compete by way of staff, amenities, and senior housing costs. It will also be interesting to see if the trend in preferring to age at home with the assistance of quality home care continues. A lot can happen to the senior care landscape in 20 years.

Caregiverlist® would love to know about you and your family's projected needs. Where do you see yourself living when you are in need of assistance? Are you hoping your family will care for you? Do you see yourself moving into some sort of assisted living well before you absolutely need it?

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