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Is Senior Housing Coming Online too Quickly?

Digested from “New Senior Housing Raises Concerns Supply Will Outpace Demand From Baby Boomers”
The Wall Street Journal (8/11/15) Pleven, Liam

Senior housing occupancy rates fell again in 2Q 2015 to 88.4 percent — 0.2 percentage points below the previous quarter and 0.3 percentage points behind 2Q 2014. Senior-housing investors are taking a hit in the stock market as well, with drops of 11 to 20 percent this year compared with the 2.2 percent increase posted for the Standard & Poor’s 500 index in 2015. 

Baby boomers are the second-largest generation, behind millennials, and remain a target demographic of the apartment industry as they look to downsize. But are senior-housing developers targeting them too aggressively? 

“The Social Security Administration estimates that 9,600 people a day will turn 65 in 2015,” The Wall Street Journal reports. And major markets such as Dallas, Atlanta and Chicago are ramping up construction on senior-housing units to accommodate them, with more than 13,000 units currently under construction in eight of the 31 primary metro markets.

The question remains whether retiring boomers will seek out senior-housing options. If not, the market will be oversaturated with the current construction supply, creating not only lower occupancy rates but stagnant rent growth as well.

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