The Three Simple Things Pushing Senior Housing out of Multi-Family's Shadow

[Cory Wake]

In the past, senior housing has often been viewed by investors as a cousin to multi-family. "Multi, but for the elderly." It received little attention and was poorly understood. Lately, however, the industry has been coming into the spotlight and establishing itself as a separate and distinct investment category.

In 2024, NCREIF categorized senior housing as its own category, carving it out from multi-family. Green Street published a report predicting senior housing will have the highest 5-year NOI growth of all real estate classes. WSJ and CNBC published featured articles about growing investor enthusiasm for the sector.

There are three simple pillars underlying this growing enthusiasm:

1.) Unprecedented demographic change: baby boomers just began turning 80, and the number of aged 80+ people in the U.S. will approximately double over the next ten years. That rate of change is unlike anything the country has previously experienced, and it’s expected to translate to a wave of demand for senior housing communities. Notably, the number of occupied senior housing units in the U.S. is already at a record high, and this demographic shift is only just beginning.

2.) Record low supply growth: COVID, rate hikes, and raw materials inflation have collectively driven senior housing construction activity to record lows. Unit starts as a % of existing inventory are at their lowest recorded levels.

3.) Attractive valuations: valuations bottomed in 2023. They’ve since recovered but remain substantially below pre-COVID peaks.

Taken together, valuations are attractive at a time when demand growth is accelerating and supply growth is decelerating. These conditions are attracting the attention of investors, analysts, and journalists, and giving senior housing its own identity as an investment category in the public consciousness.