By Victor Calanog and Barbara Byrne Denham
Victor Calanog is chief economist
and senior vice president for research
at Reis Inc. ( www.reis.com). He writes
a monthly column on property types
for Scotsman Guide. Calanog and his
team of economists are responsible
for data models, forecasting, valuation
and portfolio services for clients in
commercial real estate. Reach him
Barbara Byrne Denham is an economist in the research and economics
department at Reis Inc. She previously
served as chief economist at Eastern
Consolidated and is a Ph. D. candidate
at New York University, where she
has studied economics, monetary
theory and game theory. Reach her
Fort Myers, FL
Fort Wayne, IN
San Jose, CA
U. S. Metro Average*
Source: Reis and US Bureau of Labor Statistics
Percent over age 60 in 2015
Increase in the population age 60 and over (2010-2015)
Two-year independent living seniors-housing
rent growth Q1 2015 - Q1 2017
*Sum of all 112 metros tracked by Reis Inc.
Cities With the Highest Independent Living Seniors-Housing Rent Growth
Aging population is only one
driver of seniors-housing rent growth
The seniors-housing market has garnered more attention over the past few years as baby boomers swell the
ranks of the retirement demographic. Developers have built numerous housing communities for seniors across
the country, and investors have been curious about the growth potential of this property class, given that it
barely existed 20 years ago.
While rent growth has been robust in a number of markets because of the growth in demand, rent-growth rates have
varied widely across the United States.
Markets that have seen the fastest
growth are not necessarily the same
ones that have seen strong growth in
more traditional property types, such
as multifamily and office. This is because
of a number of factors — with demographics, as one would expect, being
the biggest variable.
That is, seniors-housing rent growth
should be more prominent in markets with an aging population, such as
Florida and the south in general. This
presumption is true to some extent, but
the data shows that the connection is
not so direct.
While a number of southern metros have
seen the strongest rent growth, others
have seen little to no growth in rent in
the seniors-housing niche. Moreover, the
markets that have seen the highest rent-growth rates span the country.
It is interesting to note that most of the
metros that saw the fastest growth in senior-citizen population (ages 60 and over) are not on this list. Many of these
cities — such as Austin, Texas — are recognized more for their overall population growth than for the growth among
the ranks of senior citizens. Austin’s 60-and-over population, however, grew nearly 40 percent from 2010 to 2015,
yet its independent living rent-growth rate was close to the national average.
Many metros on the list of the lowest rent-growth metros not only had flat or negative population growth but,
for the most part, they also had a high ratio of seniors and population-growth rates among seniors above the U.S.
average. The cities on the list of the 10 lowest rent-growth cities fitting that description are listed below along
with their independent living seniors-housing rent-growth rates between first-quarter 2015 and first-quarter 2017.
■ n Jackson, Mississippi, 2.4 percent;
■ n Daytona Beach, Florida, 2.2 percent;
■ n Springfield, Massachusetts, 2.0 percent;
■ n New Orleans, Louisiana, 1.9 percent;
■ n Buffalo, New York, 1.7 percent;
■ n Evansville, Indiana, 1.4 percent; and
■ n Albuquerque, New Mexico, 1.2 percent.
Rounding out the 10 cities on the lowest end of the spectrum, according to Reis’ analysis, are three cities that
posted negative rent-growth rates for seniors housing over the two-year period. They are:
■ n Youngstown, Ohio, -0.1 percent;
■ n Syracuse, New York, -0.2 percent; and
■ n Springfield, Missouri, -0.5 percent.
Still, there are clearly a number of factors driving the demand for seniors housing that cannot be attributed to
demographics. Economic factors, including job growth, are likely just as significant.
In sum, it pays to understand how differently this asset class has performed across the U.S. Some metros, such as
New Haven, Connecticut, and Westchester County, New York, have not seen strong population growth in their
seniors demographic, yet they have posted average rent-growth rates for independent living facilities that are in
line with the U.S. average.
Other metros that have had a rapidly growing senior population, such as Boise, Idaho, have seen slower rent-growth rates over the past two years. Thus, there are other more idiosyncratic factors in these metros driving rent
growth in seniors housing, and it pays to do the research to determine what those idiosyncrasies are and how
they affect specific markets. n