Orlando Leads the Way for Senior Housing Growth

A contingent of cities across the South and Sunbelt lead the way for senior housing growth this year as growth in the 65-and-over cohort and stable property metrics drive demographic tailwinds for the sector, according to a new report from Marcus & Millichap.

Orlando leads the way, as its 65-plus population is projected to grow by 25.1% by the end of 2025, while existing senior housing communities in San Francisco and San Jose will be bolstered by growth in the baby boomer generation.  Other cities in this category include Dallas Fort-Worth, Greenville, Jacksonville, Las Vegas, Minneapolis-St. Paul, Tampa-St. Petersburg, and Tucson.

Meanwhile, Sunbelt markets attracting retirees will benefit from in-migration momentum. Marcus & Millichap predicts that Florida markets like Miami-Dade will benefit from retirees seeking a favorable tax environment, while Austin and Phoenix will record strong growth among older Americans. Other cities poised to benefit from migration patterns include Charleston, Cincinnati, Denver, Houston, Milwaukee, San Diego, and Seattle-Tacoma.

Secondary and tertiary markets including Portland, Raleigh, and Sacramento are likely to record steady expansion of the over-65 cohort, while cities like Richmond and San Antonio will see an influx of retirees looking to live outside dense metro areas. Markets with more pressured fundamentals—like Indianapolis, Riverside-San Bernardino, and Salt Lake City—will face a steeper climb to recovery, while Atlanta, New York City, and Washington, D.C. will be challenged by what M&M calls a “stout” development pipeline.

Markets likely to see the weakest expansion of the senior cohort over the next five years include Baltimore, Chicago, Detroit, Louisville, Philadelphia, and St. Louis.

The care segment of the senior housing industry will play an increasingly vital role in the healthcare sector, the report notes. Though the senior housing asset class “changed forever” as a result of COVID-19, the acceleration of vaccination rollouts across the country is a “light at the end of the tunnel” for operators.

“The pandemic’s unprecedented financial and operational challenges weighed on property performance and brought occupancy to record lows for all care segments,” the report says. “The return to pre-pandemic property metrics will be long and uneven across markets and care segments and will hang on the successful procurement of the COVID-19 vaccine.”

Smaller care operators and unlicensed facilities will be at a disadvantage as senior housing providers are forced to increase scrutiny on operations, design, amenities, and infectious disease control, while better-capitalized providers will be positioned to take advantage of new technologies that will allow them to provide high-acuity care at lower costs. The report also notes that greater oversight is likely on the horizon for senior living providers, particularly with a change of leadership at the Centers for Medicare & Medicaid Services.