In my last blog, I mentioned the opportunity of catering rentals to a more senior demographic – “renting by choice is trending among other age groups, including the 55-plus households who want to downsize to a more maintenance-free, connected lifestyle, with easy access to healthcare, culture, entertainment, and food,” (PWC Emerging Trends in Real Estate 2018). Today there are over 50 million US residents who are 65 and older. That number is projected to grow to 75.5 million by 2030. By that time, the 65+ age group will make up 21% of the US population (US Census Bureau). This is a huge demographic shift.
Real estate investors can position themselves accordingly in order to best take advantage of this secular trend. Markets with world class health care will be extremely attractive to these residents. Even more specifically, apartments in close proximity to healthcare within those markets will definitely be a prize asset in the near term. By catering the living spaces to older residents and having extra care amenities, apartments will attract the best tenants as well as demand a premium in rents. An interesting idea would be to offer a free transportation service to and from the hospital and other care facilities.
As with every opportunity, it is not without its challenges. The two main challenges to senior-focused apartments are surplus supply and labor shortage. As with any big trend, numerous investors are already developing new units to serve this growing demand. As shown in the chart below, occupancy has languished due to a strong rise in supply. However, this trend is a reflection of robust development activity in a handful of primary markets. In reality, 48% of this growth can be accounted for in Dallas, Chicago, Minneapolis, Atlanta, Houston, Miami, and Boston alone. This means markets outside of these seven cities present extremely favorable supply and demand balance.
The other challenge is labor shortage. “With the national unemployment rate falling to a 16-year low of 4.3 percent in July 2017, the challenge of recruiting and retaining employees is expected to only grow”. This can be combated through part time positions and boosting productivity through technology as well as tapping into trends such as the sharing economy (Uber). Tomorrow, I will reveal the best city to implement this strategy in!