A Growing Need
It is no secret that the population is aging. It is expected that the 75+ age population will grow by over 20% between the years 2010 and 2020. Additionally, an increasing number of seniors survive into their 80’s and 90’s, but do not necessarily need nursing care. These elderly baby boomers have benefited from long periods of economic growth and have real estate wealth, personal investments, and pensions. As the national fiscal crisis continues to worsen, it is expected that state and federal governments will continue to encourage private pay, community based settings for the care of the elderly.
Between 2010 and 2050, the 85+ population will grow from 5.7M to 19M increasing from 1.9% of the total population to 4.3% The growing state of the US demographics will be the most influential factor in the aging population and the general demand for assisted living. With our exceptional knowledge of the senior housing industry and efficiency in construction, development, and management Medical Development Corp is well positioned to take advantage of the current economic rebound. Unlike other real estate classes, senior housing continues to grow because of our increasing senior population. Furthermore, seniors’ attitudes have become increasingly more accepting of the assisted living concept. In effect, they are not discouraged by or scared of moving to an assisted living residence.
Additionally, as moratoriums on CONs for nursing homes continue throughout the country, assisted livings have become more commonplace. Alzheimer’s wings and high acuity wings in assisted livings have enabled facilities to take patients who would otherwise end up in nursing homes. Because of the ever increasing need, the national occupancy rate has remained relatively stable for the past 10 years. Nationally, the assisted living market is constricting. Of the 2.0 million senior housing units nationally, only 200,000 are assisted living. The year 1999 was the peak year for construction with 45,000 units opening. These facilities are now over 10 years old. In 2008-2009, only 11,000 new units opened. Today, new development is less than 2% of all inventories.
Additionally, the national occupancy has wavered between 92% and 88%, but remains about 90% despite the downfall in the economy and the new construction that has occurred in the past 20 years. Therefore, one can assume assisted livings are not only a recession proof asset class, but that demand continues to outpace supply. Net national supply has grown at 14,600 per year nationally since 2004. This is less than half the units per year from 1997-2003. We believe there is ample opportunity for new construction.