New York–Colliers International is turning its attention to one of the most solid commercial real estate sectors with the creation of its Seniors Housing Practice Group. Eighteen-year industry veteran Mark Silver will serve as national director out of the company’s New York office, spearheading the formation and management of the Seattle-based commercial real estate services firm’s new group.
Silver, who comes to Colliers from his position as managing director and co-head of the National Seniors Housing Practice Group at real estate services firm Jones Lang LaSalle, will manage the specialty division’s daily operations and will incorporate Colliers’ base of well-established and respected resources to develop the new entity into a national service provider in the seniors housing sector. The Seniors Housing Practice Group’s offerings will include brokerage services and capital markets and strategic planning services in all sub-sectors of the seniors housing and healthcare markets. Those sub-sectors include independent and assisted living properties, dementia care facilities, continuing care retirement communities, as well as surgical centers, hospitals and medical office buildings.
Colliers’ establishment of the new service line centers on a variety of factors that point to the impending demand for seniors housing and healthcare real estate, and it appears that the company’s timing is just right. “There are a number of factors that will spur demand and the largest is the demographic in this country,” Silver tells MHN. “There are not enough beds to house our parents, so the demand is compelling, and the baby boomers are not even of age yet. By 2030, 20 percent of our population will be over 65–it is expected to grow from 12.4 percent now to 19.6 percent–and that is a compelling reason for investors and REITs to own seniors housing.”
However, it’s not just the aging population that will boost demand, it is also the country’s overall population, which continues to undergo a growth spurt. Another factor that is widely expected to increase the need for additional seniors housing and healthcare facilities is the Patient Protection and Affordable Care Act and the Healthcare and Education and Reconciliation Act of 2010, or healthcare reform. The legislation will require the 32 million uninsured Americans to acquire health insurance. “We think it will have a big impact, but we don’t know how it will shake out, we don’t know how the government is going to handle it,” says Silver. Regardless, he is confident that seniors, insured or no, will not be ignored. “Seniors are important to politics and they play an important cultural and financial role, so we don’t think the government will pull the rug out from under them. The government will continue to support them to whatever extent is necessary.”
With an insufficient amount of facilities to accommodate anticipated demand driven by the aging population, the growing population and health reform, development in the seniors housing sector is destined to escalate–eventually. “When the baby boomers come of age and all the economic components of the country fall into place, there will be additional development going on,” he notes. “There just aren’t enough beds and that is a compelling reason to develop.”
But will there be overdevelopment? It may be too early to tell, but certainly, lessons were learned during the economic downturn. Excessive development hobbled the office sector, as the global financial crisis and collapse of the job market pummeled demand for space. Seniors housing has fared better than the office market and most commercial real estate sectors during the recession, but it has hardly gone unscathed, and the industry won’t forget it. “We used to consider the seniors housing sector recession proof, but through this great recession, we see that it is not,” Silver says. “Values have come down, although they haven’t come down as much as other commercial real estate sectors, and that is because of the demographics.”
The seniors housing market’s potential vulnerability to future economic downturns notwithstanding, Colliers believes the formation of its Seniors Housing Practice Group is a timely move for its clients and for the company. “Colliers International is growing by leaps and bounds, and they see a tremendous growth opportunities in commercial real estate’s seniors housing sector.”