It looks like economists soon will be confirming something else that’s in the air: an economic recession.
Many of us know all too well what life during a recession is like. As a general rule, it’s not pretty.
Consider the Great Recession of 2007–2009, which did a real number on the nation’s economy. Nearly nine million people lost their jobs during those years. Many millions more saw their savings and retirement funds eviscerated. Careers were ended or put on hold. Others never got started.
The Great Recession delivered a slight blow to senior living. But the sector got off pretty lightly compared with many other parts of the economy — and notably, other real estate classes. In fact, it become somewhat fashionable afterward to say that although senior living might not be recession-proof, it is recession-resistant. The phrase remains, and with good reason.
Various post-recession autopsies found three general reasons to be bullish on senior living. The first was that demand for seniors’ housing continued to grow, even as the overall economy contracted.
The second was that the supply of seniors’ housing remained relatively low.
The third was that other commercial real estate sectors — particularly apartments and office space — took a severe beating.
As with just about everyone else, I am not looking forward to another economic downturn. But assuming what many suspect is true — that a recession already has begun — it may be time to ask an uncomfortable question: Will senior living be recession-resistant this time? I’d say it’s about a 50–50 proposition.
Let’s start with the first reason for relative success last time: demographics. If anything, they look more favorable now than they did a decade or so ago. The silver wave we’ve been waiting for is about to hit shore. That can only help, and help in a big way.
As for supply? Well, things are a bit different this time. The reality is that many more senior living units are in play now, with additional units being added by the day.
Then there’s how other real estate classes fared. My suspicion is that the apartment sector will do much better this time around. As for office space and other real estate classes? It’s more of a mixed bag.
In fact, it’s more of a mixed bag overall.
Unfortunately, there’s another new curveball as well: Growing concern about the benefits of congregate living. As COVID-19 spreads, many families and residents are wondering whether it’s a good idea to have lots of other old people living in close proximity. It’s too soon to know how significant of a factor this concern will be, but it clearly is emerging as a factor.
Compared with the Great Recession, this current economic crisis is more likely to show whether senior living is recession-resistant. Let’s just hope the answer isn’t a long time coming.