A rendering of the Whitby Harbour Retirement Living Complex. Just over 9 per cent of Canadian seniors, 65 or older, live in some type of seniors’ residence, according to a recent CMHC report.Courtesy of Fieldgate Properties
The seniors housing sector, once considered a niche asset class, has in recent years become a more mainstream product type for individual and institutional investors alike.
Despite the negative impacts of COVID-19, the sector is experiencing its best period ever for investment, experts say.
Commercial real estate firm CBRE states that total investment volume for the past two quarters alone, of more than $4.6-billion, will match the all-time annual record set in 2015.
Fieldgate spent 65 years building shopping centres, commercial business parks, golf courses and thousands of houses – before following the market into seniors’ housing.
Typically, the annual volume of seniors housing investment in Canada is in the $1.7-billion range, according to a recent CBRE report. Yet, in just half the time, the sector saw twice that volume, “and the momentum shows no signs of slowing down,” the report states.
“It’s one of the best investments in all real estate, and I think that’s going to continue over the next 10 to 20 years,” says Mathew Burnett, senior vice-president, health care capital markets at CBRE.
“It’s the only real estate class where the future demand is quantifiable,” Mr. Burnett explains of the “needs-driven demand” that characterizes the asset.
“In Canada, the sector is crucial; the 85-plus cohort will not just double, but double-and-a-half – 150 per cent – over the next 20 years.”
The industry’s resilience proved itself during the recession as well, Mr. Burnett adds. But “there is nothing the sector can go through that is worse than COVID, and the industry is rebounding strongly from that.”
Mr. Burnett says investors are attracted by high returns on investment; in 2021, the national average was 6 per cent – double that of more popular asset classes such as industrial, apartments and offices.
“That’s unbelievable yield in this environment,” Mr. Burnett says.
The recent high transaction volume is, in large part, the result of major portfolio acquisitions by giant American operators, including Blackstone, Ventas, Sabra and Harrison Street.
“The look and feel of a retirement residence have changed dramatically over the last 10 years,” says Sean McCrorie of Cushman & Wakefield.Courtesy of Fieldgate Properties
But individual investors purchasing single property sales, prices for which hover around $10-million, are also contributing to the robust market, according to Cushman & Wakefield’s Seniors Housing Industry Overview, published in January.
The sector’s healthy returns are partly the result of consistently high occupancy rates, the overview states. For five years prior to COVID-19, Canadian seniors housing occupancy rates hovered at around 92 per cent. During the past two pandemic years, occupancy rates fell to a historic low of 85.5 per cent.
“Now, we’re seeing an uptick in occupancy,” says Sean McCrorie, executive vice-president and practice leader, seniors housing and health care, at Cushman & Wakefield and author of the overview.
Mr. McCrorie’s findings project a return to pre-COVID-19 occupancy rates by early 2024, and further growth to 95 per cent by the end of 2026, “as the 85-plus cohort begins to grow exponentially.”
Despite the recent decline in occupancy, rent for seniors housing in Canada’s largest cities continued to rise by about 3 per cent, according to the overview.
In 2021, the monthly fee for a one bedroom in a private, “independent living” seniors home (providing daily meals and weekly housekeeping) is $5,284 in Toronto, $4,907 in Vancouver and $4,323 in Calgary. Montreal has the least expensive rent, at $1,888.
Just over 9 per cent of Canadian seniors, 65 or older, live in some type of seniors residence, a recent CMHC report states. Quebec has the highest capture rate, at 17 per cent, while rates in other provinces vary between 5 per cent and 10 per cent. (The numbers rise the older the population, with nearly one in three 85-year-olds living in a seniors residence.)
“Quebec has many more units of ‘active living’ seniors apartments,” Mr. McCrorie says, referring to complexes that are much like other apartments – except they have minimum-age requirements.
“Developers in other provinces are starting to build more of these kinds of communities in order to capture more of the market,” he adds.
This new product is typically more upscale, larger and amenity laden than older seniors housing. “The look and feel of a retirement residence have changed dramatically over the last 10 years,” he says.
“As the baby boomers age, their tastes and wants will be different than the prior generation.”
Indeed, brochures for new seniors housing complexes often promote a luxury lifestyle for exceedingly active people. Ottawa-based Nautical Lands Group, for example, builds “pro-age” communities that swap “the gentility of the rocking chair with the vitality of the rock wall.”
Fieldgate Properties Ltd., in Toronto, sees the future of seniors living as aging-in-place communities that include posh, active-living apartments, along with buildings for independent living and assisted care, all situated amid beautiful settings.
Seniors’ housing is becoming more upscale, with more common areas, like this great room, at Whitby Harbour Retirement Living.Courtesy of Fieldgate Properties
Relatively new to seniors housing development, Fieldgate spent 65 years building shopping centres, commercial business parks, golf courses and thousands of houses – before “following the market” into seniors housing with its first investment in 2015, says Todd Cullen, vice-president of acquisitions and development at Fieldgate Properties.
The Kingsway Arms, in Aurora, Ont., “had a really good reputation,” Mr. Cullen says. As Fieldgate renovated and expanded the residence, it learned everything it could about an asset class that, as the developer describes it, is part traditional real estate, part full-service hotel, with the added responsibility of health care.
Operational excellence is crucial to the success of seniors housing investment, Mr. Cullen says, and Fieldgate “inherited a wonderful care team at Kingsway.”
However, as long-time property managers who’ve always enjoyed “the service aspect of owning buildings,” it eventually hired its own director to oversee operations.
The success of Kingsway Arms has led to four new developments in Ontario, in Whitby, Milton, Dundas and Burlington, all in various stages of completion.
“It was a no brainer” to get into the business, Mr. Cullen says. Fieldgate has witnessed firsthand the “natural evolution of young families, who purchased our homes 65 years ago. As they became empty nesters and started looking for somewhere to go, it had us searching for the right opportunity to enter the business.”
Fieldgate has more seniors communities in planning stages. “We’re most excited about creating a complete community,” with housing, retail, services, restaurants and recreation facilities, Mr. Cullen says.
For a demographic that is living longer, more active lives than seniors of generations past, a mini-town “catering to its needs is our ultimate vision,” he says.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
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