Upcoming Senior Housing Acquisition Market Will Be for Distressed Properties

The senior living industry will exhibit accelerated growth in the coming years, stimulated by an aging population and need for memory care services, says industry and market researcher IBISWorld, but most of the acquisition activity will revolve around turnaround opportunities. 

In the next five years, an improving economic environment combined with an aging population, healthcare reform legislation, and new service offerings will facilitate industry expansion, according to IBISWorld, as more seniors will be able to sell their homes and afford retirement community fees.

However, an unstable commercial construction market is expected to keep the supply of senior living communities low, and as a result, the industry should expect more mergers and acquisitions through 2017, with most focusing on distressed properties. 


The real estate investment trusts (REITs) have been running the show in the senior housing acquisition market and are still well-positioned for further investments, but banks and private equity are both beginning to view senior living as a desirable sector again, says Ibis World. 

“Many of the acquisitions expected during the coming years will likely remain with distressed properties, and the high-end properties are unlikely to be sold,” the report summary says. 

Industry operators are expected to adjust their services and facilities to attract a more knowledgeable and educated resident base by incorporating more technology into their communities.


Additionally, the industry will need to adapt to growing market demand for memory care.

“Over the past five years, the number of assisted living facilities that provide dementia care has risen as a proportion of total facilities,” said IBISWorld industry analyst Anna Son in a statement. “On the other hand, companies that do not include these services have suffered by the changes in the housing market and economy.”

The senior living industry has, for the most part, proven to be recession resistant, but it has been hampered by the poor housing market as older Americans struggle to sell their homes and leverage equity to move into a retirement community. 

As a result, says IBISWorld, the housing market downturn has mitigated the industry’s revenue growth. During the recession, industry revenue will end up averaging an annual 2.8% growth to $51.3 billion between about 2007 and 2012, according to the market researcher’s estimate. For 2012, IBISWorld is projecting a 3.3% revenue increase.

Higher occupancy rates due to recession-restrained new construction activity have “buoyed” the industry’s profit margins, Son says, offsetting the declines in demand from those affected by the economic downturn. 

Access the report.

Written by Alyssa Gerace