Aging baby boomers aren’t flocking to senior living facilities in the way builders expected. And it’s creating oversupply issues.
Occupancy rates for senior housing were at 87.9 percent in the second and third quarters, the lowest since 2011 when it dropped to 87.5 percent, according to the Wall Street Journal.
Builders may have been overzealous in recent years. They picked up the pace since 2012, building 84,727 units since then, nearly 25,000 more than were built in the six years prior.
Boomers likely won’t move into this housing until they reach around 80 years old, which isn’t until 2026, according to recent data. They are healthier than previous generations and have chosen to stay closer to their families rather than move to all-senior facilities. Developers may have also overestimated how many can afford to live in such facilities, which can cost between $3,000 to $8,000 per month.
“What’s happened to the industry is that everyone sees the demand, and they can’t quite figure out exactly when to time it,” said Lucinda Baier, chief executive officer at Brookdale Senior Living, according to the Journal.
Still, there’s plenty who are bullish on the market. Related Companies announced this month it is partnering with manager Atria Senior Living to build $3 billion worth of high-end urban rentals aimed at seniors over the next five years. [Wall Street Journal] – Dennis Lynch