A stronger housing market is propelling some older adults to sell their homes and move into luxury senior living communities where they can maintain active lifestyles, notes a new national report by Marcus and Millichap. That movement is causing some supply issues, especially in the South, the report maintains, even though new communities are being constructed, with plans for additional ones in the works.
The demand for seniors housing will continue over the next few years as many baby boomers, now aged 51 to 70, move closer to retirement, according to the real estate investment services firm.
Currently, the states with the most units under construction (more than 2,000 each) are California, Florida, Ohio and Texas, but other states could see more development as demand improves there and rents increase to historic levels, Marcus and Millichap says. And parts of Florida and Texas are cause for concern “and could cause softening property operations in the months to come,” the seniors housing research report says.
Marcus and Millichap predicts that investment in seniors housing will remain strong through this year, although the possibility of higher interest rates is leading real estate investment trusts to be more selective. Private investors, however, are making up the difference, looking especially for properties with a value-add component. “Assets in need of repositioning will remain popular, as capital infusions allow owners to push rents and increase yield,” the report’s authors say.
Regarding specific property types, Marcus and Millichap predicts increasing occupancy and rent growth in independent living, strong demand and increased rents but occupancy pressure in assisted living, rent growth despite decreasing occupancy at skilled nursing facilities, and increasing occupancy and rents at continuing care / life plan retirement communities.
