Apr 14, 2022

Investment in Senior Housing Grows as Pandemic Subsides

Manny Cominsky

Some good news out of the world of senior housing, where a recent survey and accompanying study by JLL Valuation Advisory, a leading professional services firm that specializes in real estate and investment management, indicates that interest in senior housing is picking up across the board as the COVID-19 pandemic continues to subside. This study, known as JLL’s Seniors Housing & Care Investor Survey and Trends Outlook, is based on survey results from over 100 respondents who are all transactional professionals who specialize in the senior housing and care space, from investors to developers, to salespeople and facility operators. The results show that investors and residents alike are the most excited they’ve been about the prospects for senior housing since before the COVID-19 pandemic began. 

More concretely, these results show that levels of investment, construction, and occupancy have again started to climb and show strong signs of continuing this growth into the future. With retirement housing continuing to be such an attractive area for investment and growth, you can expect the nation’s largest housing brands to continue to devote significant resources to building and developing cutting edge and amenity-filled communities that are perfect for any retirement lifestyle. While you can download the full report for yourself here, below we excerpt some of the most exciting developments uncovered by JLL’s survey. 

Transaction Volumes Back on Track

One of the best signs for the senior housing industry is that investment in the space has rebounded following a drop during the COVID-19 pandemic. At the outset of the pandemic in 2020, investment in senior housing and nursing care dropped to its lowest level since 2012, reaching a 43% reduction in year-over-year transaction volume in Q4 2020. Since this time, however, transactions in the senior and nursing homes space has been steadily on the rise spurred on in large part by the country’s recovery from the effects of the pandemic. Following this strong trend, transaction volume finally reached its 2019, pre-pandemic levels at the end of 2021, up 61% percent from the beginning of the year. The highest levels of growth during this time were seen in the senior housing segment, with nursing care investment rebounding at a slightly lower rate.

After record lows during the pandemic, transaction volume is finally moving towards pre-pandemic levels.

Occupancy Recovered Through 2021

It is no secret that the COVID-19 pandemic had a significant negative impact on occupancy rates in senior housing, as occupancy rates reached historic lows in the depths of the COVID-19 pandemic. But just like transaction volumes, occupancy rates recovered over the course of 2021, reaching roughly 83% in primary market locations (large cities like Tampa, Florida Atlanta, Georgia)  and roughly 84% percent in secondary market locations. While occupancy rates are still not quite at their pre-pandemic peaks, JLL remains optimistic that the strong occupancy growth trends will continue and that occupancy rates will soon reach their pre-pandemic highs. JLL notes that two interrelated factors will continue to drive up occupancy rates in senior living. First, the 75+ population continues to grow at an increasing rate. Second, the amount of new construction in the senior living space drastically slowed during the COVID-19 pandemic. Together, along with other facts like increased investment in the space, JLL predicts that occupancy rates will continue to continue to grow into the future.

Another factor that JLL looked at to show that the industry has likely recovered from its lows during the pandemic was to examine the lowest recorded occupancy rates in all major markets since the beginning of the pandemic. In a positive sign, each market recorded higher occupancy rates at the end of 2021 than the lows recorded during the pandemic. While the industry still has a ways to go as far as reaching peak occupancy, JLL concludes that the worst is likely over.

Increased Construction Rates

Like everything else, the rate of construction of new senior living facilities slowed significantly during the pandemic. JLL states that while new constructions have begun to increase and are starting to head towards their pre-pandemic levels, there is still a good amount of room to go. At the end of 2019 construction as a percentage of existing inventory was 7%, while at the end of 2021 it was only 4.8%. JLL also noted that while recovery in new construction is starting to be seen in primary markets, new construction remains down in secondary markets. 

The JLL survey goes on to show that where new construction have perked back up, it has largely been concentrated in Sun Belt markets (markets across the southern United States) as older adults continue to leave high cost areas in places like California, New York. and Illinois, and head for cheaper warmer destinations like Florida and Arizona. In fact, of the 10 cities to see the highest level of increase in new construction, 8 are located in the Sun Belt. These include several well-known retirement destinations like Sarasota, Florida and Atlanta, Georgia. JLL predicts that senior living builders will continue to follow retirees as they move into these warm, low-cost states. 

JLL's survey shows that states in the Sun Belt continue to be the most popular retirement destinations in the country.

Long Term Tailwinds

At the end of the day, despite the difficulties brought on by the COVID-19 pandemic, JLL predicts that demand will remain strong for senior housing as the country’s older population continues to grow. JLL notes that currently 30% of the population is made up of individuals who are 55 or older, and that with modern advancements in medical sciences that individuals will continue to live increasingly active, healthy lives and therefore look to live in places that provide not only care but the engaging lifestyles they want. 

JLL sees so much growth in this population that the supply of senior housing will continue to be outpaced by the demand for housing caused by the baby boomer generation (those born between 1946 and 1964) well into the future. In fact, JLL predicts that the senior housing sector will be undersupplied by as many as 600,000 units by the year 2045. Given that by 2050 the population of people aged 80+ is expected to reach 47.5 million people or 12% of the US population, JLL concludes that investment in senior housing will have to increase greatly to match the forecasted supply. 

If you’re interested in reading more stories like this one, make sure to keep checking the Sunbound blog for updates. We’ll bring you weekly updates on not only general industry news, but also relevant information about all our favorite communities and places to relocate and retire across the country. 

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