Spending for home health care will surge by almost $90 billion annually as of 2070 due to the aging of populations around the globe, a major global investment management firm predicts in a new report.
Institutional investors would be wise to consider opportunities stemming from the “aging mega-trend,” and some of the five hottest opportunities are related to the aging-in-place movement, according to the report from PGIM, the new name for the global investment management businesses of Prudential Financial Inc. (NYSE: PRU).
Multifamily condominium real estate and technology-enabled medical services and devices—including those that enable more on-demand home care—are two of those top five opportunities, state’s PGIM’s report “A Silver Lining: The Investment Implications of an Aging World.”
As baby boomers age and downsize, they are eyeing condo communities in walkable, urban areas that are mixed-use, enabling them to live, work, and have recreation all in proximity, creating the real estate play for investors.
“Locations such as Raleigh, Atlanta, Nashville, and Austin are examples of areas that offer these types of infill locations to older generations where the urban lifestyle of a New York or San Francisco is being recreated on a smaller scale,” the report states.
Other areas attractive for development include those with a high population density of seniors, including Florida, the Midwest, and New England.
While it may be more of a long-term opportunity, investors also should size up startups intended to help aging people remain independent and healthy, such as in-home sensors, smart pill boxes, and on-demand home care services, according to the report authors. They dub this sector “silvertech.”
“The primary driver for silvertech is the growing opportunity for providers to develop medical devices and technologies that help the elderly remain healthy and active, while staying in their own
homes,” the report authors write. “Indeed, aging in place is a major trend: research by the Society of Actuaries shows that a majority of retirees consider remaining at home to be a top priority.”
In addition to condo real estate and silvertech, these are PGIM’s other three top investment opportunities linked to aging populations:
– Urban life sciences real estate
– Senior housing real estate
– Pharmaceutical and biotech companies
The demand for new senior housing in the United States is projected to increase by about 850,000 units between 2010 and 2030, according to Senior Housing Analytics figures cited by PGIM. Attractive investment opportunities exist for independent living, assisted living, and memory care communities.
In the United States, the asset class could attract institutional investor interest due to its stability, the PGIM authors emphasize. Occupancy in senior housing has consistently ranged between 85% and 91% over the past five years even as supply has increased. And because people tend to move into independent or assisted living due to a change in their physical condition or the need to adapt their lifestyle, this type of real estate is less sensitive to economic downturns. The United Kingdom and Japan are among the foreign markets where senior housing investments are most attractive.
The urban life sciences opportunity can be referred to as “eds and meds” plays. This is because the real estate required by biotech companies and other organizations involved in research and product development related to age-related diseases often is located near universities or other educational institutions.
In the near-term, pharmaceutical and biotech companies make sense to invest in, particularly those that are targeting age-related diseases such as Alzheimer’s and Parkinson’s. Longer-term plays would include investing in startups intended to help aging people remain independent and healthy, such as in-home sensors, smart pill boxes, and on-demand home care services.
To complete the report, PGIM analysts interviewed investment professionals, conducted new proprietary research, and met with industry experts. It was released March 21.
Written by Tim Mullaney