Healthcare REITs: Signs Of Life
A favorite of yield-oriented investors, Healthcare REITs have struggled over the past four years with a myriad of headwinds as the sector awaits the long-anticipated demand boom from aging Boomers.
The “aging boomer” thesis is certainly no secret. The healthcare real estate industry - especially senior housing - has seen ample speculative supply growth in anticipation of this coming demand.
Senior housing fundamentals appear to be stabilizing after several years of weakening occupancy and rent growth. The construction pipeline is finally cooling just as demand should begin to accelerate.
The skilled nursing and public-pay side, however, remain troubled by lower reimbursement rates, rising cost of care, and declining occupancy. There’s opportunity in this dislocation for well-capitalized REITs.
Rising home values and the worsening housing shortage are an often-overlooked factor that will positively affect healthcare REITs as seniors tap growing home equity savings to pay for health services.
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