T
he impending retirement of baby boomers is set to drive significant demand in the senior housing market, with Capital Economics predicting a 50% surge by 2040. This growth is expected to be fueled by the "silver tsunami," a wave of Americans aged 65 and over entering prime retirement age. As a result, investors are being drawn to the sector as an attractive alternative to traditional commercial real estate.

    The US Census Bureau estimates that the 65-plus population will grow 30% over the next 16 years, reaching 80 million by 2040. Currently, around 11% of this demographic lives in senior housing, implying a significant increase in demand from 6 million units in 2023 to 9 million in 2040.

    Rents are also expected to rise due to a tightening supply of senior housing facilities. The sector saw over 5% year-over-year rent growth in 2023, nearly double its 20-year average. Capital Economics estimates that the senior housing market will offer average annual returns of 13% over the next four years, peaking at around 16% in 2026.

    For investors seeking a safe haven from the challenges facing commercial real estate, senior housing presents an attractive opportunity. With strong capital value growth and income returns, the sector is poised to outperform other real estate sectors.