Real estate professionals might be surprised to find out which demographic of renters is growing at the highest rate. U.S. Census data by RentCafe shows that over the past decade, the biggest increases in the renting population came from a few different sources: seniors aged 55 and up, renters holding a bachelor degree or higher, and families with no minor children.
All this to say, real estate professionals are finding that there is a new group of seniors that want to stay in the city.
As 2.5 million seniors over 55 entered the rental markets over the past decade, the aging baby boomer population are empty-nesters looking to downsize into their later years.
The real estate markets are taking notice of these shifting demographics and behaviors dubbed the ‘silver tsunami,’ and are developing mixed-use properties with additional services.
The Silver Tsunami
Populations in the U.S. are aging as the baby boomer generations make their way into the senior demographic.
Quick Facts Regarding the Baby Boomer Demographic:
- The number of Americans over 80 are expected to double in the next couple decades from 6 to 12 million people
- The average age for a traditional senior living rental property is currently 82
- Mixed-use developments targeted towards the baby boomer generations are promoting urban independent living communities
However, the rental paradigm is shifting, with more seniors considering mixed-use properties where they are able to live, shop, and find medical services all within a few block radius.
Investors looking into urban mixed-use properties can take advantage of big opportunities that can deliver large returns.
Mixed-use developments targeted towards the baby boomer generations are promoting urban independent living communities.
Not necessarily the typical idea of senior living, but with Americans living longer, healthy, active lives, senior lifestyles are adapting and the real estate industry is trying to keep up.
The market appears divided between offerings for younger baby boomers still seeking an active lifestyle versus those that require a level of assisted care.
But one similarity runs true among the aging population of baby boomers: they are looking for convenience in housing options among residential rental properties and are often willing to pay top dollar for it.
The industry has some work to do in their future development plans and to attract seniors into their residential and commercial properties today.
Reasons Baby Boomers Crave Mixed-Use
Over the past decade, baby boomers have been driven out of single-family homes and into the rental markets for a variety of reasons:
- Shortly after the housing crash in 2008, many baby boomers found themselves in the midst of dramatic lifestyle changes.
- Many were unable to keep their home or effectively trade down after the crash
- Baby Boomers are now seeking a different lifestyle that includes convenient and walkable amenities
The major difference from Millenials is that more baby boomers are willing to pay a premium for the additional comforts of a newer mixed-use community.
These comforts that are attracting Millennials into urban areas are also bringing in the baby boomers who want to find most of their daily errands and activities within a few blocks from their front door.
For baby boomers, walkability of the neighborhood is important in terms of overall convenience and simplifying their lifestyle to eliminate driving activities.
They want to easily and leisurely shop, eat, and relax all within the same mixed-use community.
This is also good news for other commercial property types that market themselves towards older populations.
For example, medical offices are starting to be incorporated into mixed-use property developments alongside grocery stores, shops, theaters, and restaurants to provide residents and the community an all-in-one space.
Effectively blending in medical spaces can be a challenge for commercial real estate developers, but could be a major attraction for an older population of potential tenants.
Baby boomers are also flocking south to regions along the Sun Belt like Tampa, Dallas, Phoenix, and San Diego that present warmer urban areas than the northern cities like New York, Boston, or Chicago.
This plays along with the trend of aging baby boomers looking to stay more active and involved within a bright and lively community.
What This Means for Investors
The building momentum among baby boomer renters presents a great opportunity for real estate investors looking into commercial mixed-use buildings in urban areas like downtown San Diego.
Baby boomers are driving strong demand for a niche of commercial properties that include a plethora of amenities and provide convenience.
Mixed-use properties in urban areas should see a healthy spike in demand in the near-term as baby boomers jump on the bandwagon.
Investors that play their cards right and tailor their amenities and ancillary non-residential building space to the older generations will be able to attract a higher level of tenants and because of this, be able to receive a higher level of rental income from their property.
In the senior housing markets, investors are well-positioned to attract more investment in the coming years due to a rapidly aging population and expected market economics.
It’s estimated that the average age of the baby boomer generation will reach 80 by 2026, driving more demand for senior living.
To catch up with the pace, senior housing developments are trying to ramp up to provide more communities around senior living, assisted care, and nursing homes.
Commercial real estate investors are keen to the higher returns they can find with senior housing projects.
For typical commercial property investors looking for intermediate-term holdings, seven-year returns on senior housing projects can easily generate upwards of 13%, considerably higher than other types of major property investments.
The baby boomer generation is still a big influencer within both the residential and commercial real estate markets, and as they age they only come with higher demands for convenience and comfort.
However, savvy real estate investors can take advantage of the trend and make larger returns on a wealthy, aging population by creatively constructing mixed-use investment properties tailored to baby boomers and their needs.
Where the younger generations are filling the city streets and developers are racing to fill their units, the baby boomers are making their voice heard too, and joining the urban movements.