Many real estate investment trusts (REITs) have shifted their focus into healthcare and away from senior living due to COVID-19. But vaccinations have had an impact since then. Is now the time to invest in senior housing?
Senior living facilities were the worst places to be during the coronavirus pandemic; 34% of COVID-19 deaths were nursing home residents, which is bad. But it's even worse when you consider that only 1% of the population lives in nursing homes. Now you better understand the implications: Nursing homes were death traps.
Senior housing was not only dangerous for residents; it wasn't a good investment anymore. Family members started pulling out their loved ones -- the ones who survived -- and of course there were all those tragic deaths. All that meant vacancies, which meant much less rent being collected.
Because of the COVID-19 vaccine, things have turned around, and new cases of the coronavirus are down to practically zero in senior living facilities. People are starting to feel safe to return -- or to have their loved ones return -- to a senior living or skilled nursing facility. As a result, senior housing REITs are coming back to life.
The biggest senior housing REITs aren't quite ready to go back full force to senior housing and are still shifting their portfolios from senior housing to medical office and lab space sectors, according to McKnight's Senior Living. But other REITs are investing in senior housing.
The future of senior housing
People aged 80-plus make up the largest market for senior housing. The number of people over 80 in the United States is expected to nearly double over the next 30 years, growing at a rate of about 4% per year every year until 2040.
As of March 2021, current occupancy rates have returned to pre-pandemic levels. The outlook looks good, but senior housing REITs have still not recovered from the 2020 occupancy drop. During the pandemic, occupancy was the lowest ever, meaning rent collection was also at its lowest point.
The healthcare REIT category
Within the healthcare REIT sector are five subsectors: medical office, lab space, hospital, skilled nursing, and senior housing. Of those, medical office and lab space have been steadier investments during the pandemic, largely due to government relief funds.
The Millionacres bottom line
What happened at senior living facilities during the coronavirus was tragic and scary. Seniors were not being protected and cared for as they should have been but were instead treated abysmally and maybe even criminally. This puts doubt in some people's minds about the safety of senior housing moving forward. A safer bet for now seems to be healthcare REITs that focus on medical office buildings, research labs, and upper-tier senior housing.
What should help dictate whether you want to invest in senior housing REITs is this: whether you believe we've learned a lesson here that won't be repeated, or if you think this could happen again.