Come 2027 and Beyond, Seniors Housing Will Experience Significant Demand

Seniors housing has emerged from the pandemic and is doing just fine with a brighter future ahead, according to a panel of analysts and operators speaking this week at ULI’s annual conference in Dallas.

The sector has proven to be recession resilient in the past and with the soon-to-come boom or Baby Boomers needing care and housing, combined with a lack of projected supply, investors are taking notice.

Lori Alford, co-founder, COO, Avanti Senior Living, led a discussion with Lynn Katzmann, Founder and CEO, Juniper; Aron Will, Co-Head Senior Housing for CBRE Capital Markets, CBRE; Zach Bowyer, senior managing director and head of living sectors, Cushman & Wakefield; and Beth Mace, chief economist and director of research and analytics, National Investment Center for Seniors Housing & Care.

Plan Now for a Crush in 2027

Mace said to consider that 85-year-olds today were born in 1937. The significant boost in seniors should come soon when today’s Baby Boomers reach that age.

The 80-plus cohort is expected to grow by 500,000 in 2025 and by 1.1 million in 2027. Cushman & Wakefield reports that seniors housing demand supply shortfall in 2032 will be 338,772 units and in 2037 will be 460,211 units.

Will pegged that for 2025 to 2027 and “we will need so much more seniors housing to become available by then,” he said.

Not ‘Recession-Proof,’ but ‘Recession-Resilient’

Will said this is a good time to be investing in seniors housing, which he mentioned that around the Great Recession in 2008-09, seniors housing was the best performing commercial real estate class, while sectors such as multifamily housing “went negative.”

“Seniors housing is not recession-proof, but is recession resilient,” Will said. “Seniors housing didn’t experience a massive cap rate compression during the pandemic because owners didn’t want to sell then and that rent growth now can come from top-line growth.”

He said given the rise in Social Security benefits lately, rents could grow by 6% to 7% and as high as 12% annually.

“The industry survived the pandemic, and now is coming out in great shape,” Will said.

Mace said portfolio managers today are looking to add seniors housing to their asset blend because it gives them a more diverse portfolio.

Seniors Housing Recognizing ESG Potential

The panel said that seniors housing is now acknowledging its potential role in meeting ESG goals.

The “E” (environmental) is most manageable because it’s quantifiable; the “S” (social) is easily attainable because providing seniors housing, by definition, provides a social good through helping older adults; and the “G” (governance) can be achieved through diversity, equity and inclusion hiring.

Solving for ‘Tension’ Between Hospitality and Care

Katzmann said that there still exists a “tension” between operators who are more focused on hospitality versus care. She said care needs to take precedence because so many older people, on average, face multiple chronic conditions.

Katzmann predicted that soon, operators might separate their care from their hospitality offerings.

“This will expand their opportunities, create greater value in their assets and therefore lower their cap rates,” she said.

Mace said operators in the near term can “crack this new nut” of oncoming Boomers by providing wellness and socialization. She added that today’s seniors housing designs are modifying their floor plan layouts to be more conducive to addressing those benefits.