- The rise of technologies that help the elderly stay in their homes threatens to upend one of commercial real estate’s biggest bets: Aging baby boomers will leave their residences in droves for senior housing.
Developers and senior-housing companies have spent billions of dollars over the past five years to build facilities that provide housing, food, medical care and assistance for the elderly.
While these properties have been filling up with people born during the Depression or World War II era, real-estate investors are eagerly eyeing the massive baby-boomer generation: 72 million people born between 1946 and 1964, or about one in five Americans. Their needs would require hundreds of thousands of new units, if previous demand patterns persist.
But this wager on elderly care is falling short of expectations, and there are concerns that it could become one of the biggest real-estate miscalculations in recent memory, some analysts suggest.
That is in part because venture capital and other companies are expected to invest about $1 billion this year in these and other “aging-in-place” technologies that are starting to enable seniors to enjoy similar living standards and access to care in their own homes.
That is about double the amount investors spent three years ago, according to 4Gen Ventures, a new venture-capital company focusing on such startups.
New products and services include sensors that respond to a range of medical conditions, facial recognition for identifying visitors and houses with malleable fixtures that can be adjusted as residents age.
Driving these efforts is the belief that seniors would prefer to remain at home near their families and friends than live among others their own age or older. “People don’t want to go to a place where there’s only a bunch of other old people,” said James Crispino, head of health and wellness at design firm Gensler.
Senior-housing developers added 21,332 new units in 2018—more than double the number added in 2014, according to the National Investment Center for Seniors Housing and Care, or NIC, an industry organization.
That has made senior housing one of the fastest-growing commercial real-estate sectors, ahead of office, retail, hotels and apartments, according to Green Street Advisors, a real-estate research firm.
Development is expected to accelerate because in about one decade, boomers will start reaching their mid-80s, the typical move-in age for senior housing. New senior housing is expected to hit 3.5% in 2023 of the total supply, compared with 3.2% this year and 2.5% in 2015, Green Street said in a report.
Occupancy is still strong but has been ebbing and could fall further as more facilities come to market. Senior-housing occupancy rates dropped in the third quarter of 2019 to 88% compared with 90.2% in the fourth quarter of 2014, according to NIC.
Some companies specializing in senior housing are suffering. Shares of Ventas Inc., a big health-care real-estate investment trust, fell close to 9% one day last month after it said the occupancy rate of its senior-housing communities declined for the 17th straight quarter, on a year-to-year comparison basis.
Moreover, the average age that people enter senior housing has been rising, partly because of improving health. It is about 84 to 85 years today, compared with 82 one decade ago, according to Green Street analyst Lukas Hartwich.
Senior housing isn’t about to go away. It remains a compelling option for people with medical problems, loneliness and the need for assistance in eating, shopping and other daily activities.
But the new aging-in-place movement could undercut demand further. If seniors are able to stay at home later in life, “that could drain away the younger new customers for senior living,” said Dominic Endicott, co-founder of 4Gen Ventures. “Then your base population is older and you’re even less attractive to younger seniors.”
Aging-in-place advocates think innovations will make it easier for seniors living at home to be less dependent on others.
One startup, LifePod Solutions Inc., is launching this month a new voice-recognition service that initiates conversations with seniors about their health or their plans for the day, makes suggestions and then sends caregivers alerts depending on their responses.
Design firm Gensler is looking at ways to create homes with features like height-adjustable bathroom sinks and living rooms that can easily convert into bedrooms and cabinets that enable people to see what is inside of them with the touch of a hand.
U.K. developer Tolent Construction Ltd. is planning to break ground early next year on South Seaham Garden Village, a 1,500 home and mixed-use development south of Sunderland, in the Newcastle region. The homes will include cutting-edge sensors and other technology so that seniors can live next to families and younger single people.
Three hundred of the homes will be for people over 55 years old. South Seaham Garden will also have a village square, health center and 20,000 square feet of office space for startups and others studying new technology to help seniors age in place.
“You’re discouraging social isolation because you’ve designed the development in a way that brings people together,” said Hugh Daglish, associate urban designer at IDPartnership, the architecture firm working on the South Seaham Garden development.
Senior-housing companies said their facilities have a lot to offer that technology can’t match.
“Loneliness has a negative impact that can’t be solved by technology,” said Cindy Baier, chief executive of Brookdale Senior Living Inc., which owns and manages about 800 senior-housing communities.
Other senior-housing developers are trying to modernize their services. PGIM Real Estate, which has $1.6 billion invested in the senior-housing sector, has been buying and developing properties that include new amenities like pools, gyms and cafes.
“We’re seeing rapid evolution of the product,” said Steve Blazejewski, managing director of PGIM Real Estate.
Like, 1500 of those new units are within a mile drive of me. It's been batshit to see. Like fuckin' grain silos with windows.
Know what, though? All these developers can turn on a dime and rent to Gen Z as "co-living" spaces or some shit and permanently crush the idea of independence and homeownership for everyone under 30. They'll laugh all the way to the bank and the future of America will grow up in a Dickens novel.
BRB buying something pastoral with a gate