Is there too much risk involved to invest?
As a species, we are living and working for longer much longer now than in previous decades. Currently, approximately 14.9% of citizens in America are over the age of 65. By 2022, workers over the age of 65 are expected to rise to 27% for men and 20% for women. Martin Mbeteni, an experienced real-estate banker, affirms that the seniors housing market would be a strong investment in the current market due to its ever-growing demand.
The assisted living housing sector relies heavily on the number of nurses available and could include a higher level of risk for a potential investor. This is due to its dependence on the current economic state and the availability of funding, which has been cut in recent years. The 82-to-86-year-old age range dominates the assisted living sector, with demand expected to increase by millions of people over the next few years. Conversely, popularity for independent living properties for seniors is on the rise. Even though supply and demand for these properties is consistently increasing, annualized completion is not keeping up – forming a gap in the market for potential investors to exploit.
How are baby boomers are shaking the market?
Baby boomers are now approaching the age where retirement is on their minds, and now range from their mid-fifties to seventies. Despite this, they have different needs from previous elderly generations. They want safer housing, more accessible housing and a welcoming community of like-minded people. They want a home. And with easier movability through readily available transport, baby boomers are less likely to just settle for their closest option in proximity. Martin Mbeteni insists that it is important to analyze the need for each different generation, as this will be one of the biggest market-changers and a lucrative investment opportunity.
Year-on-year, seniors housing is providing greater returns on investment than areas such as offices, retail spaces, as well as the National Council of Real Estate Investment Fiduciaries. Seniors housing appreciation returns were also higher than any other major property investments on a 10-year basis. This market has repeatedly topped the list for its development and investment prospects in 2018, making it one of the best bets for smart investment this year.
Mbeteni states that there is plenty of room for innovation in this market, but there are still pitfalls to look out for. Investors must adapt to each generations’ individual needs. With baby boomers having good access to new technology and reliable transport, if they feel dissatisfied with local retirement options their community, there is a risk that they will look elsewhere for their hard-earned retirement.
Martin Mbeteni is the Vice President of Capital Markets Seniors Housing for JLL. He has over 10 years of experience in helping owners and operators of seniors housing secure capital (debt or equity) from domestic and international lenders and investors for development or acquisition of seniors housing properties across the country.