By Quinn Brewer
Many people will tell you senior housing is a strong investment opportunity because of our country’s relentless aging demographics. The population of our country is shifting, and seniors are taking over. With 10,000 Americans turning 65 every day, there will be a strong demand for senior housing due to sheer numbers. But are aging demographics alone enough to ensure a strong senior housing investment?
In truth, there are many factors investors need to keep in mind when determining whether a potential investment will boom or bust. The following are just a few.
- Local salaries. A recent article showed that “the Amazon effect” is impacting senior housing occupancy in Seattle and is expected to impact its two new secondary hubs, as well. Due to high employment and strong wages, more families in the community can afford quality senior housing for their aging loved ones. The same is true on the opposite side of the scale, however, as more depressed communities are less able to afford private senior care. One of the largest questions you need to answer as an investor is whether there will be sufficient wealth in the community to keep occupancy strong throughout the term of your investment. It doesn’t matter how many aging people live near your senior community if none of them can afford to live there.
- Business and city development. On a similar note, what types of new businesses are entering the community? High-paying technology companies? Low-paying service companies? Is the population growing or shrinking? Residents in your community need reasons to stay in the region—not reasons to leave it. Make sure there is sufficient growth on the horizon to keep the market—primary, secondary, or tertiary—on the map.
- Accessibility. Even in primary markets, senior housing needs to be easily accessible—both for residents and their families. Residents want to make sure they’ll be able to access public transportation to run errands and attend social activities that make their lives even more fulfilling. Family members need to know the community isn’t so far across town that visiting will be challenging. How close is the community to local freeways? Bus stops? Hospitals? What about grocery stores, restaurants, churches, and salons? Is there a partnership with rideshare services to increase accessibility? These factors will impact the community’s occupancy rates and long-term success.
- Employment. You can’t run a quality senior community without quality employees. How is the unemployment rate in the local area? Are there enough people looking for jobs in the senior care sector? Just as importantly, how will you be able to keep them? The investment must have a long-term recruitment and retention strategy to be successful.
- Culture. Are aging people in the local community familiar and comfortable with the idea of senior housing? Or, is there a strong culture of multi-generational households in the area? Consider how well the concept of senior housing will be received in a particular market and what types of education efforts will be needed.
Aging demographics do indicate strong earning potential for senior housing investment. However, there are many other factors that contribute to the equation. Industry trends can never guarantee how any specific investment will perform. Take time to understand the issues impacting the senior housing marketplace. Your job as an investor is to find the operators and fund managers who are committed to keeping these issues top of mind for every investment opportunity.
Quinn Brewer is a communications expert for Senior Living Fund, a private equity company that invests in quality senior housing opportunities nationwide. He lives in Kansas City and can be reached at [email protected]