Ask Pilar: Investing in Senior Living

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A demographic of baby boomers has allowed senior living to become a winning investment, both in commercial real estate overall and healthcare realty specifically. Over the past decade, senior living has outperformed every other asset classes of commercial real estate.

But recently, some investors have expressed concern over rising interest rates and potential overbuilding. Which begs the question, is senior living still a wise investment? The research indicates yes. A survey from CBRE showed nearly 60% of U.S. investors actually plan to increase their senior living portfolios this year, an increase from less than 50% last year.

It may be true that some primary markets face a potential oversupply, but many secondary and even tertiary markets hold lots of potential for both renovation and new construction. A significant portion of supply across all markets is outdated, leaving opportunity for much-needed enhancements.

The operator is hands-down the most important player in an investment decisions. They can make or break any opportunity, regardless of market or demand. As with all investment opportunities, market conditions like interest rates or political issues, can impact returns.

Although senior living has seen unparalleled growth in the past 10 years, it is reasonable to think the industry will keep growing, perhaps at a slower rate. The great news about senior living is the opportunities are just beginning. The current wave of seniors now seeking care is the first of many to come. There is room to grow in the sector and many opportunities for solid returns for smart investors.

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