Aging Gracefully: The Evolving Global Senior Housing Market

Published on July 1, 2024 by Nishith Sen

Introduction

Senior-living communities offer housing and care choices specifically tailored for older adults, primarily those aged 55 and above. These communities include diverse housing and lifestyle choices for elderly persons, adapted to the challenges of health issues related to ageing. One of the major components of senior living is senior housing, providing physical space for older adults to reside. Senior housing offers various levels of care and amenities as follows:

Independent-living communities: These offer housing options such as apartments, condos or single-family homes for active, independent seniors. Residents have access to amenities such as fitness centres, social activities, dining options and transport.

Assisted-living facilities: These provide housing, personal-care services and support for seniors who need help with activities of daily living such as bathing, dressing and medication management. Residents have their own apartments or rooms.

Memory-care units: These specialised facilities cater to individuals with Alzheimer’s disease, dementia or other memory-related conditions. Staff members are trained to provide personalised care and engage residents in activities that stimulate memory and cognition.

Continuing-care retirement communities (CCRCs): These offer a continuum of care including independent-living facilities, assisted-living facilities and skilled nursing care, all within one campus or community.

Skilled-nursing facilities: These offer 24x7 medical care and supervision. Residents with chronic health conditions or those recovering from surgery or illness reside here. Services include rehabilitation, wound care and assistance with daily living.

Senior co-housing: These facilities have older adults living together in a community designed to promote social interaction, shared resources and mutual support while maintaining individual privacy and independence.

Global trends driving senior housing-market growth

Ageing populations: Populations globally are ageing, driven by falling birth rates and extended life expectancy. The global population of individuals aged 65 and above is expected to double over the next three decades, reaching a staggering 1.6bn by 2050, according to projections of the UN Population Division. Asia is at the forefront of this demographic shift, with countries such as Hong Kong, South Korea and Japan leading the way.

Japan, in particular, is known for its ageing population and holds the top spot in terms of the proportion of elderly citizens. Other Asian economies are also undergoing significant changes, with advances in healthcare and increased life expectancy contributing to this transformation. Approximately 40% of the population in Hong Kong, South Korea and Japan is forecast to be 65 years and older by 2050, in stark contrast to highly developed regions, where the share of older individuals typically hovers in the low 20s.

Urbanisation: This is another significant trend influencing the senior-housing market. As more migrate to cities in search of better opportunities and amenities, there is growing demand for senior-housing options in urban areas. The UN forecasts that approximately two of every three people will be residing in cities or other urban areas by 2050, highlighting the urgency for sustainable urban planning and enhanced public services. An estimated 2.5bn individuals could be added to urban areas by the middle of the century due to demographic shifts and overall population growth, according to the UN Department of Economic and Social Affairs (DESA). This surge will be concentrated in a handful of countries; India, China and Nigeria are forecast to account for 35% of the projected growth of the world’s urban population by 2050. Specifically, India is projected to add 416m urban dwellers, China 255m and Nigeria 189m.

Green and sustainable living options: Green initiatives are gaining traction across sectors, including in senior-living facilities. A number of communities are transitioning to solar panels and other clean-energy sources to power their units, resulting in lower monthly electricity bills for residents. These facilities also adopt environmentally-friendly and recyclable building materials, such as wood, brick and glass, in construction. Moreover, passive and active resource-caching systems, such as rainwater harvesting, enable residents to collect water for their needs.

Innovation and technology: The senior-living sector is currently experiencing a technological revolution, marked by ongoing innovation and transformation. Smart-home technologies, including voice-activated devices and advanced safety systems, are progressively becoming part of senior-living communities. These technological advancements significantly enhance residents’ quality of life. Virtual and augmented reality also play a crucial role in improving social connections, offering virtual travel experiences, therapeutic applications and educational opportunities. Key technologies driving the evolution of senior living include the following:

Robotics for cleaner environments and improved health
The internet of things (IoT) for enhanced safety and monitoring
Telehealth and remote-care services for easier medical assistance
AI-powered healthcare assistants
Robotics for daily assistance and companionship

Opportunities for stakeholders

Investment opportunities: Increasing demand for senior housing offers attractive investment prospects for real estate developers, private equity firms and institutional investors. The global population aged 65 and above is projected to reach 894m by 2050. As life expectancy rises and the elderly population grows, demand for senior housing is expected to surge, increasing the number of investment opportunities.

Investing in senior-housing REITs: The senior-living sector is currently navigating a challenging landscape characterised by limited construction starts, heightened demand and economic complexities. Securing financing has become increasingly difficult, leading to a significant slowdown in new development projects. Senior-living operators grapple with the delicate balance of pursuing growth opportunities while minimising risk exposure.

Interestingly, this environment appears to favour public real estate investment trusts (REITs). These entities enjoy advantages related to cost of capital and access to funding. This shift in the investment landscape marks a departure from the situation in recent years. A survey conducted by SHN revealed that private equity emerged as the dominant buyer of senior housing, followed by private REITs and regional operators. Public REITs trailed behind, but their position may evolve as market dynamics continue to shift.

Top senior-housing markets

US: The US remains a dominant player in the global senior-housing market. With a large ageing population, diverse preferences and robust infrastructure, the nation offers a wide range of senior-living options.

The US population is expected to age rapidly over the next decade. With Baby Boomers reaching retirement age, more than 10,000 people turn 65 every day.
In particular, the population of those 80+ is projected to increase by approximately 50% from 2024 to 2033 – from 13.9m to 20.8m. This significant increase underscores substantial demand for additional senior housing and nursing care. In contrast, overall population growth in the US is projected at a more modest 4.7% over the period.
Assisted-living and independent-living properties saw substantial increases in occupancy rates, surpassing 80% and 70%, respectively. The market saw the highest occupancy rates in cities such as San José (83.7%), Portland (83.4%) and San Francisco (83.4%). Lower occupancy rates were observed in Houston (73.0%), Atlanta (74.8%) and Las Vegas (74.9%).
Senior-housing communities are concentrated in the Southeast, which is home to 3,706 communities. The West (3,436), Northeast (3,320), North Central (3,303) and South Central (2,244) regions follow closely. The Southeast encompasses states such as North Carolina, South Carolina, Tennessee, Georgia, Florida, Alabama, Mississippi, Arkansas, Louisiana and Texas.

Canada: Canada’s senior-housing market is growing steadily. Major urban centres such as Toronto, Vancouver and Montreal have witnessed increased investment in senior-living communities. The population aged 75 and above is projected to grow at an approximate CAGR of 4% over the next two decades. Overall, the outlook for well-located private-pay retirement residences remains robust in the short term (two to three years) and is expected to be upgraded to “excellent” over the medium to longer term.

China: China’s ageing demographic has spurred notable advancements in the field of senior housing. Five-year projections indicate that its senior-living market will grow at a robust CAGR of over 12% to 2027. China’s population aged 60 and above stands at 18% of its total population, surpassing the 10% threshold that characterises an ageing society. Despite this demographic shift, China’s increasing wealth has fuelled the expansion of high-end senior communities in the nation.

As in many other countries, the primary factor contributing to an ageing population in China is increased life expectancy, attributed to advancements in healthcare and better living standards. Additionally, China’s one-child policy led to a decline in fertility rates, resulting in a higher proportion of elderly individuals. Average life expectancy rose significantly from 1950 to 2020 – from 44.6 years to 77.47 years. Projections indicate that it will reach around 80 years by 2050. Rural areas have a slightly higher percentage of older people than do urban areas. Western China in particular faces the challenges of a rapidly ageing population.

India: India’s senior-living market is projected to be valued at USD11.16bn in 2024 and to grow at a CAGR of 10% to USD17.99bn by 2029 due to the following:

Ageing population
Life expectancy
Nuclear families
Financial independence
Medical needs
Non-Resident Indians (NRIs) returning

Geographically, southern cities lead the way in senior living, followed by the western and northern regions. Notably, Bengaluru, Chennai, Puducherry and Hyderabad are preferred destinations for post-retirement settlement in the south. In the north, Delhi-NCR, Chandigarh and Dehradun have emerged as popular areas for seniors.

As the senior-living sector expands, so would the range of services and amenities available in the projects. With the ageing population continuing to grow, demand for senior-living housing is expected to keep increasing.

Outlook

Amid favourable market dynamics relating to supply and demand, we see a significant opportunity for senior-housing communities in 2024 to increase occupancy rates and drive operational growth, addressing some of the challenges posed by conditions in the capital market.

Before the pandemic in 2019, 17% of senior-housing communities in the 99 NIC MAP primary and secondary markets had stable occupancy levels below 80%. (NIC MAP refers to the National Investment Center for Seniors Housing & Care’s MAP data and analysis service.) Although the sector has made remarkable progress in occupancy recovery and is poised to surpass pre-pandemic occupancy levels by end-2024 on average, there remains a subset of communities still facing challenges. Specifically, 23% of senior-housing communities reported occupancy rates below 80% as of 4Q 2023. Such low occupancy levels may present difficulties, especially given the current conditions in the capital market and lending environment and rising operating costs.

The outlook for 2024 indicates a notable improvement in overall stabilised occupancy by the fourth quarter. Notably, 85% of senior-housing communities are expected to achieve occupancy levels of 80% or higher by end- 2024, slightly exceeding the share in the fourth quarter of 2019. In contrast, 13% are projected to remain within the 60-80% occupancy range, while another 2% are expected to report occupancy below 60%. The stabilised occupancy rate for senior-housing communities in the 99 NIC MAP primary and secondary markets is anticipated to reach approximately 90% on average by the fourth quarter of 2024.

Conclusion

The global senior-housing market is poised for significant growth in the coming years, driven by ageing populations, urbanisation, rising life expectancy and technological advancements. By understanding the evolving needs and preferences of seniors and leveraging innovative solutions, stakeholders could seize opportunities to create thriving senior-housing communities that enhance the quality of life for older adults.

How Acuity Knowledge Partners can help

Global organisations leverage our sector-specific expertise to make strategic decisions. Our team of seasoned real estate credit analysts, based in Bengaluru, India, supports portfolio managers, regional portfolio managers, production analysts and underwriters in portfolio monitoring and originating new loans for all property types including senior-housing properties.

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About the Author

Nishith Sen

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Nishith Sen has been with Acuity for over 12 years. Initially, he supported the Investment Banking vertical and later transitioned to Commercial Real Estate within Lending Services. Currently, he manages one of the key clients in CRE portfolio monitoring activities. Additionally, he holds a Master’s of Science in Finance.