The results for senior housing in 2020 gave investors many reasons to be bearish about senior housing. Still, if you look at senior housing’s recent history along with the forecast for the next 2, 5, and 10 years, there are many reasons to be bullish.
Senior housing took a bigger hit than other commercial real estate sectors in 2020 because of the unique set of challenges presented by COVID-19 that are not likely to be repeated. Outbreaks and additional steps taken by facilities to manage and prevent outbreaks added to operating expenses and put a drag on occupancy and bottom lines.
Before the pandemic, in 2019, the seniors housing sector had one of its strongest years, and 2020 was poised to continue that performance.
In the past ten years, senior housing has seen steady and consistent growth, as exhibited by the chart below:
The next ten years are poised to be even better for senior housing. The Seniors Housing Investor Survey and Outlook JLL Valuation Advisory show a sector on the verge of growth due to long-term solid demand from an aging baby boomer population within ten years of occupancy.
The 2020 slowdown in senior housing from the pandemic offers an unintended benefit for potential investors.
There will be supply shortages in 2021 as construction delays from the pandemic hinder the start, serving only to magnify demand. As a percentage of existing supply, units under construction dropped from peak levels of 7.0% in Q4 2019 to 4.7% in Q1 2021.
Supply shortages are one more reason to be bullish on senior housing. The boomer population isn’t getting any younger.
The outlook for senior housing in 2021 for both market performance and investment is bright. According to CBRE:
“Demand for seniors housing began to pick up in Q4 and should improve in 2021. Baby boomers have reached the active adult segment’s target age range, increasing investor interest in this asset type along with assisted living.”
Senior housing should improve in 2021, with a full recovery expected in 2022.
2020 was tough on everyone, but there are many reasons to be bullish on senior housing in the coming years.