What Makes Senior Housing The Most Recession-Proof Asset Class?



As per a recent report published in one of the leading real estate journals, it was reported that the demands for senior housing in the united states will grow from 1.4 million units in the year 2015 to 3.2 million units by the year 2040. According to the 2016 market brief of the American Senior Housing Association, it was estimated that nearly 100,000 senior housing units per year will be needed to be built by builders from 2025 to 2040 for the purpose of keeping up with demand.


It was historically difficult for an average investor to access the senior living as an asset class. Specialized operators and institutional investors were some of the primary beneficiaries of this sector as they concentrate on an asset class who demand has been driven by different demographic trends. Through the new private money real estate lenders available in the market, now the mid and small sized investors can also systematically capitalize on these trends (senior housing sector as the asset class).
Regardless of the condition of the overall economy in the U.S, senior living has continuously proven to be a strong asset class because of the rapidly aging population and short supply of newly constructed senior housing units.


Some reasons why the senior housing properties are considered to be one of the most recession-proof asset class in the united states are briefly discussed in this post. In addition, it will also briefly discuss why the rate of growth of senior housing is increasing at an exponential rate.


Reason number 1: high demand


Seniors are retiring at a truly staggering rate in America. It is estimated that about 47.8 million American who were 65 or older have retired in the year 2015. Due to the emergence of baby boomers into the age of retirement, the number of Americans 65 and older will increase to 79. 2 million by 2035.The increase in a number of people retiring will only create a greater demand for senior living facilities by the year 2035.


Reason number 2: low supply


The new construction of senior housing is not keeping pace with the increasing population of elderly people (retired) in America. The construction of senior housing had a significant decline in the year 2008 and it continued to fall through the year 2011. Units under construction have only modest growth through 2014. The need for a more newer units in senior housing is left unaddressed, which is a growing market for better communities and facilities that are tailored made to emerging retires.


– About 10,000 baby boomers are turning 65 each day
– Based on this information, it is estimated that nearly 60,000 new senior housing units will be required each year
– A 173 % increase per year in senior housing units is necessary for meeting the demand


Senior housing vs. other real estate sectors


In the united states of America, the senior housing sector has outperformed all the other sectors including apartments, hotels, industrial sectors, etc.


The Bottom Line


The resiliency of this sector in the commercial market is one of the major benefits of real estate investors in the senior housing space. An essential element of the senior housing market’s success is its lack of reliance on a particular economic or real estate environment. For the last ten years, the senior housing sector has been one of the leading performing commercial real estate sectors in the United States. This includes the period encompassing the 2007 capital market collapse, in-which returns among other commercial sectors fell as much as 20%.


This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.