Real estate investment trusts were investing heavily in healthcare facilities as of the end of last year, hoping to time the wave of America’s largest generation aging into the need for more health assistance.
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REITs acquired a total of almost $2B in healthcare sector acquisitions over the last quarter of 2023, according to a new report from CoStar News.
To fuel the shopping spree, trusts divested from office and multifamily assets over the same three-month period, with net acquisitions in both sectors dropping about $1B each.
The investment shift parallels a major population shift. The U.S. Census Bureau projects that adults older than 65 will outnumber children younger than 18 by the year 2030 in what has been called a “gray tsunami.” Some 73 million baby boomers reaching age 65 within six years means healthcare needs are projected to grow, especially with this generation of seniors living longer than the ones before it.
The sector is already booming. By the quarter ended in December, healthcare experienced net operating income growth of 7.6% over the same period in 2022, according to CoStar.
Public REIT Welltower is one example of the trend.
The REIT, which focuses on senior housing, outpatient medical properties and long-term care facilities, completed $3B in pro rata investments by the end of the year along with $277M in development funding, per CoStar. That includes the acquisition of an assisted living facility in Littleton, Colorado, for $31.5M. That purchase of Balfour at Littleton’s 86-unit facility came out to $366,280 per unit.
Where REITs choose to invest is of significance, CoStar reported, as the trusts account for 20% of the market. Healthcare real estate is the latest play for these investors, which have also invested heavily in freestanding retail buildings and industrial properties over the past decade.
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