What Senior Migration Means for Multifamily
Experts shed light on how the needs of the aging population are impacting the sector.
The aging of the U.S. population is having a huge impact on multifamily no less than on the rest of the country.
Baby Boomers are retiring, life expectancy has increased and the number of households belonging to a non-working demographic are all factors that play into national real estate trends.
As Walker & Dunlop’s 2024 Senior Housing Outlook notes, the population of Americans aged 80 and older grew by 4.4 percent in 2023, the highest level in more than a half century. Within the next 25 years, one in five people in the U.S. will be at least 65 years old, the same report shows.
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While senior housing occupancy levels dropped to record lows during the COVID-19 era, fundamentals have since been on the upswing and continue to remain strong. Occupancy reached 86.5 percent in the third quarter of 2024, marking the 13th consecutive quarter of improvement, according to a Quarterly Senior Housing Update from NIC Map Vision.
Highly sought after locations
So where is this population moving to, and where are they leaving from? Between 2015 and 2019, more than 3 million older persons annually moved during the prior year, according to a 2022 report from the U.S. Census Bureau.
There was also some evidence of people 85 and over “reversing” their retirement move by going back to their previous area. But tracking the migration patterns of seniors and retirees is more complicated than that.
The Sun Belt is a perennial favorite destination for Baby Boomers. The region offers a lot of benefits, such as low-income taxes, affordable housing markets and milder weather, Jacques Gordon, director of the Graaskamp Center for Real Estate at the Wisconsin School of Business, told Multi-Housing News.
Florida remains among the most sought-after destinations, regardless of its current difficulties. “Despite back-to-back hurricanes hitting the Tampa-St. Petersburg area, demographers don’t see any sign that Florida will be bumped from the top destination for retirees any time soon,” Gordon said.
But tracking the migration patterns of seniors and retirees is more complicated than that. Migration preferences appear to vary by state and age group in unexpected ways. The Census Bureau study showed that well-known retiree magnets, including Arizona and Florida, indeed ranked high in net domestic migration for those ages 65-74. One twist: such non-Sun Belt states as Colorado, Minnesota, Virginia and Washington, had a net loss for in the 65-to-84 bracket—but a net gain in residents 85 and up.
Strong senior migration patterns have also been observed in suburban areas of major cities due to their accessibility and tranquility, noted Tim Safransky, vice president of acquisitions at Arden. College towns can also be appealing due to their quality health care and cultural amenities, he noted.
An inclination toward homeownership
Migration’s impacts on the senior housing market are trackable. The sector is still returning to pre-pandemic levels with limited amounts of new supply coming online in the last few years.
And new supply numbers aren’t expected to soon pick back up. Senior housing’s under-construction pipeline represented 3.8 percent of the total inventory in the second quarter of 2024, down from 4.8 percent during the same period in 2023, according to the Quarterly Senior Housing Update.
Newmark Co-Head & Vice Chairman of Healthcare and Alternative Real Estate Assets Ryan Maconachy pointed out that in consequence, the rental rate numbers for senior housing are significantly higher year-over-year. In some popular retirement destinations, rental rates have marked rent increases by 15 to 20 percent more than the national average.
“We don’t see a scenario where 10,000 units of senior housing are delivered nationally for at least another 18 to 24 months,” Maconachy said.
READ ALSO: Baby Boomers Expect More From Independent Living Communities
Not all Baby Boomers are looking to move into senior housing, however. Gordon said that one current trend is that older persons are tending to remain more independent and looking to avoid more traditional senior housing settings.
“The current cohort of people in their sixties and seventies is in better health and has more assets tied up in real estate than any prior generation,” Gordon said. Further, high interest rates are deterring some “empty nesters” who might otherwise have looked to sell their homes and move.
“Taken together, these trends tend to reinforce the high housing prices seen in many major metros, because the typical age-related turnover of housing has been delayed,” Gordon noted.
Shifting the focus
The patterns for aging population migration trends are not always that different from those of the general population, Maconachy told MHN. That said, some states do experience a higher net out-migration for Baby Boomers than others.
In particular, California, Illinois and New York are the top three net out migration states, Gordon said. But prices in those metros don’t necessarily take a hit, thanks to their supply constraints. Simultaneously, younger migrators and their housing needs frequently fill the supply gap left by an older generation moving away.
While repositioning some properties for younger demographics is important, Safransky noted that there is still a stable senior population in affluent urban core areas. High levels of service and proximity to cultural amenities are key drivers for the aging population.
“What’s particularly interesting is how this demographic shift is influencing building design and amenity packages across all our markets,” he said. “We’re incorporating more universal design elements and multigenerational living features even in our standard multifamily developments.”
Further, the prioritization of health is at the forefront of many migration decisions influencing not only the location but the types of homes that people are looking into upon retirement. The future of senior living involves health-optimized homes, better access to healthy food and support for social interaction and physical activity.
