Why senior housing could be the next real estate play

Senior Living Market Opportunity - Senior living industry is on the cusp of a demand boom, especially from the baby boomer generation, with over 4 million boomers reaching 80 in the next 5 years [1] - Occupancy rates at senior living communities are hitting new highs [1] - Ventas, a senior living REIT with a $31 billion market cap, has seen its stock rise by approximately 14% year-to-date [2] Investment and Returns - Ventas is investing billions of dollars annually in senior living, observing returns in the 7% range initially, potentially reaching mid-teens with leverage [3] - Acquisitions are being made below replacement costs, a rare investment characteristic in the real estate sector [3] Supply and Demand Dynamics - Annual inventory growth at senior living facilities dropped below 1% in Q2, a record low since 2006 [4] - The number of senior housing units under construction reached a decade low of fewer than 22,000 units in the fourth quarter of last year [4] - High construction labor costs, material costs, and current rent levels are making new development financially challenging [5] - Population growth is expected to outpace even the highest levels of new development in senior housing [6] Multifamily Market - Strong demand is absorbing record supply in the multifamily market, leading to increased occupancies and rents [7][8] - Multifamily starts were the primary driver of gains in overall housing starts [8]