Demographics Reshape Senior Housing, Medical Office Landscape

The U.S. population aged 65 and older is expected to grow by 7 million over the next five years, a demographic shift that’s set to significantly impact the commercial real estate (CRE) market—particularly in senior housing and medical office buildings.

According to a report by Marcus & Millichap, demand for independent living, assisted living, memory care, and continuing care communities is projected to rise sharply. Most senior housing residents are over 75, a group expanding by at least 4% annually. To keep pace, more than 600,000 new units will be needed in the next five years. For comparison, only 60,000 units were delivered during the peak year of development in 2019.

Occupancy rates in senior housing have rebounded to pre-pandemic levels, now in the high 80% range. Rents are also increasing faster than in most other property types.

The aging population is also expected to drive demand for healthcare services. Americans over 65 currently average more than seven doctor visits per year, compared to fewer than two annual visits for those aged 18 to 44. An increase of 7 million seniors will generate an estimated 23 million additional doctor visits annually—boosting demand for medical office space.

Roughly 8.4 million square feet of medical office space was added over the past year. While vacancy rates have edged up to 9%, the anticipated surge in demand is expected to lower vacancies and push rents higher.

Both senior housing and medical office sectors face ongoing labor shortages.

“Seasoned operators with strong existing teams will be best positioned to capitalize on the sector’s robust growth outlook,” Marcus & Millichap noted.

Source: GlobeSt.