The rapidly aging population is expected to benefit senior housing, as demand increases and new construction slows down due to the pandemic.
Welltower and Ventas are the major players in the industry and are expected to benefit from the surge in demand. Baby boomers, born between 1946 and 1964, are reaching retirement age and looking for comfortable living options. They may choose to age in their own homes or consider independent living facilities or assisted living depending on their health needs. By 2030, all baby boomers will be over 65, and there will be a significant increase in the number of older Americans in need of senior housing.
The rapidly aging population is expected to be a boon for senior housing. After having a rocky few years during the Covid-19 pandemic, assisted and independent living facilities are on the road to recovery. Occupancy, while not at pre-Covid levels, is improving. What’s more, demand is increasing at the same time new construction slowed down due to the health crisis. “This is a very, very rare occurrence in real estate in general, where your demand trends are accelerating and your supply is going to be stuck … for at least a couple of years,” said Wells Fargo analyst Connor Siversky.
All of this, as well as pricing power and moderating labor costs, are likely to drive positive performance for those in the senior housing business, he said. Welltower and Ventas are the two big players in the space, and the real estate investment trusts are expected to benefit from the explosion in demand, several analysts have said. Ventas has an average rating of overweight and Welltower has an average rating of buy, Quoting FactSet.
“Within seniors housing, we remain confident in operators’ ability to recapture [net operating income] lost during the pandemic due to the strong rate and affordability outlook,” Raymond James analyst Jonathan Hughes wrote in a note Friday. “Longer-term, increasing demand from the ‘Silver Tsunami’ of aging demographics and declining new supply impact could create a potential multiyear cycle of strong [skilled nursing facility] and seniors housing performance.”
There will also be a decline in the number of adult children available to care for their parents, Quoting data from the National Investment Center for Seniors Housing and Care. “You’ve got this whole generation of baby boomers that are reaching this age where they need help, and they’re turning to the market,” said Charles de Vilmorin, CEO of Linked Senior, a company that provides engagement tools for senior living communities. “And the market has not been prepared.”
As baby boomers near retirement, they are looking for a myriad of ways to live comfortably. That may mean aging in their homes for as long as possible. It also may be eventually looking into independent living facilities or even assisted living, depending on their health needs. The generation, born from 1946 to 1964, began turning 65 years old in 2011, and by 2030, they will all be older than 65, Quoting the U.S. Census Bureau. That year, 39 million Americans will be between 75 and 84, 25 million will be between 75 and 84 and 9 million will be 85 and older. About 50% of those in assisted living facilities, for example, are aged 85 and older, while 31% are between 75 and 84 years old, Quoting the National Center for Assisted Living.
There will also be a decline in the number of adult children available to care for their parents, Quoting data from the National Investment Center for Seniors Housing and Care. “You’ve got this whole generation of baby boomers that are reaching this age where they need help, and they’re turning to the market,” said Charles de Vilmorin, CEO of Linked Senior, a company that provides engagement tools for senior living communities. “And the market has not been prepared.”
The demand for senior housing is expected to explode in the coming years, presenting a significant opportunity for investors. With the aging population and the limited supply of new construction, companies like Welltower and Ventas are well-positioned to benefit. The increasing demand from the “Silver Tsunami” of aging demographics, coupled with the declining availability of adult children to care for their parents, creates a favorable market for senior housing.
As the baby boomer generation reaches retirement age, they are seeking comfortable and suitable living arrangements. This may involve aging in their own homes or transitioning to independent or assisted living facilities based on their health needs. The aging population is set to grow significantly, with millions of Americans entering the 75+ age bracket by 2030. The majority of those in assisted living facilities are aged 85 and older, highlighting the need for specialized housing options.
Investors and analysts are optimistic about the future of the senior housing market. The strong rate and affordability outlook, combined with the anticipated surge in demand, indicate a potential multiyear cycle of strong performance in skilled nursing facilities and seniors housing. With the supply of new construction expected to be limited for the next couple of years, companies like Welltower and Ventas are predicted to experience positive growth.
The senior housing market is at a critical juncture, with the demand set to skyrocket in the coming years. Investing in the sector, particularly in companies like Welltower and Ventas, could prove to be a lucrative opportunity for investors looking to capitalize on the “Silver Tsunami” and the changing dynamics of the aging population.
