We are a Chinese fund that is interested in investing in ground up senior housing projects in Florida and Texas. It appears that we are not alone in this desire to invest in this market. Is there more room for these kinds of investments? When might the market become oversaturated?
We believe senior housing sector still has room for growth in the US and Europe markets. Ground up development in the sector is slightly different in terms of debt raise and development risk; however, over all, it is still a sector in demand and some cities have less inventory than others. Just like any development, a feasibility report and careful assessment should be done to provide knowledge in terms of demand vs. supply.
I would anticipate considerable room for growth giving two factors: tremendous demographic growth due to the aging of the baby boomer generation and longer life expectancy for that generation, and the fact that both Florida and Texas are states with no state income tax or estate tax. Now that the new federal tax law eliminates deducting state income taxes from taxable income, the benefit in living in a low tax state has increased, so combined with people retiring, the much larger demographic of the baby boom generation and the like, I would think a good deal more senior and assisted living in these two states will be necessary to meet the growing demand.
I have had quite a few inquiries about this subject of late. Yes, the trend will continue for more senior citizen housing projects. Most data show the number of Americans over 80 doubling from 6 million to 12 million in the next 20 years. By 2035, about 1/2 the households will have someone over 65 years old. So, the demand will be there and, since the numbers of elderly keep growing, there is no concern for over saturation at this point. An analysis state by state of aging demographics and current senior sites is warranted before you make a decision as the opportunity is beyond Florida and Texas. A number of factors will contribute to the increase. Unlike Asia, Americans are less likely to take in an older relative; millennials relocate more to find a job so they will not be their elderly parents; an ever increasing awareness that when you are retired, you should live near good healthcare; better medical care and lifestyles are increasing the aging population. I believe the trend for more senior housing projects will not be so much stand-alone properties, but integrated into an urban center. Assuming wealth and health increase, senior citizens will want more amenities, like health clubs, restaurants and nearby walking trails as standard accouterments.
Given the aging of baby boomers, I believe there is room for growth in the senior housing markets. Specific markets require diligence in terms of need, income status of occupant pool. Are you looking at continuing care or senior living? What are the healthcare facilities and providers like in the particular marketplace? I would ask why those particular states. Florida may well be oversaturated, but that needs to be determined by locality. I would do some research into demographic shifts. I am in New York and see more and more people looking for places in the tri-state region. Areas like the east end of Long Island, because affluent children have homes there.
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