Elder care homes are attracting capital at a record pace in Canada, as investors who stayed on the sidelines during the height of the COVID pandemic seek out properties in anticipation of an influx of aging baby boomers.
Transactions involving senior residences in Canada will grow to $4.5 billion in the current quarter and the next quarter combined, according to forecasts released Tuesday by the commercial real estate brokerage CBRE Group Inc.
That compares with an average annual pace of $1.7 billion and the annual record of $4.6 billion reached in 2015, the firm said.
Some senior homes were among the worst COVID-19 hot spots. But with the pandemic receding, investors are looking back at the fundamentals of elder care -- including higher yields than some other real estate categories, high demand and a potential shortage of supply.
“The demographic wave that’s coming is really what the sector is all about,” Mathew Burnett, CBRE’s senior vice president of health care capital markets, said in an interview, adding that in the next 15 years, the number of people 80 to 85 years old is on track to double.
“There’s a big disconnect between new supply and new demand, and we’ll likely see rental increases and higher occupancies,” he said.
Yields for elder care facilities are typically 6 per cent at the high end, roughly double that of apartments or offices, according to CBRE.
The prospect of even bigger returns as rents rise is already drawing more foreign capital to the Canadian sector. Blackstone Inc. entered the category this year with the purchase of thousands of senior units through a joint venture in Quebec, and U.S. seniors home specialist Ventas Inc. bought a Canadian portfolio.