Main Takeaway: As the share of aging demographics increases, multifamily owners and investors have an opportunity to tailor their businesses, amenities, and marketing to suit a new (older) generation of renters. A diversity of rental unit designs and amenities is more critical than ever.
Story: Older generations are living longer and increasingly choosing to reside in multifamily due to the lifestyle and financial flexibility it offers. Most older generations want to avoid being tied down, and that includes a massive single-family home.
This trend is only accelerating. According to data, by 2030 all Baby Boomers will be at least 65 years or older, and by 2035 one in three households will be headed by someone 65+. Let’s face it, those homes they purchased decades ago are not built for aging in place.
According to Forbes, those aged 55+ represented the largest increase in renters over the last 15 years. Between 2007 and 2017, rentals increased 38% for those aged 55+, and an astounding 43% for those 65 and older. To compare, rentals rose only 10% for those under 54 years of age.
There is a sweet spot with aging demographics that multifamily can help fill. There is aging in place on one spectrum and full skilled nursing care on the other. In the middle, there is a growing trend that multifamily is solving, classified as active adult rentals.
Despite being the largest homeownership group, the 65+ group is now forecasted to add an additional 4 million renters by 2035, according to the National Apartment Association.
Aside from Baby Boomers, we need to keep in mind that Millenials are getting older too. According to Megan Bowden, “recent development trends suggest that the needs and preferences of the market’s biggest renter cohort — aging millennials — are not being considered in critical design decisions. As a result, more product is being delivered that is unsuited to renter needs, creating a supply and demand imbalance.”
Further, barriers to homeownership are creating a bigger renter pool among aging millennials as well. As this group comprises 72 million members, their rental preferences as they age should be top of mind for developers. But, that isn’t happening.
More specifically, inventory expansion is at 3.5% in urban centers and 2% or less in suburban areas. Multifamily development in dense urban cores tends to be much smaller, which does not cater to the aging millennial preference for more space. Further, over the past decade, the share of two-bedroom units has dropped to 38.5% from 45.4%.
Older demographics demand a higher touch sales process, more space, more shared activity options (particularly in wellness), lifestyle-centric living, and more outdoor space. It’s time multifamily owners and investors take notice.
Expert Take on Senior Living for Multifamily
For multifamily landlords, this kind of widening gap in the market is creating a huge opportunity for investment. After all, maintaining families and communities has a beneficial social impact, which is a compelling argument in and of itself for investing in this asset class. — Emily Gallagher, Propmodo