Seniors housing is a vital and growing sector in the Canadian economy with a great deal of potential given the growing population of retiring and aging baby boomers.The population of people aged 85 and older is one of the fastest-growing age groups, and the demand for services to care for them are growing as well. With waitlists growing and government-funded construction and investment increasing, the opportunities in the sector are significant. Following are a few key trends and developments we’re tracking.

Our research shows that occupancies in the sector have fallen on average by 10% to 15% since 2020¹; we expect this to stabilize and trend higher by the end of 2024. Nonetheless, a significant and increasing gap between demand and supply for seniors residences persists. Many developers are on the sidelines because rising construction and labour costs, higher interest rates and slow lease-ups do not support investment return expectations. Uncertainty in the residential real estate market and declining sales volumes caused by rising interest rates are also impacting lease-ups. Meanwhile, some long-term care projects are being sold for alternate use as their licenses mature. To counter this trend, provincial governments are doing their best to incent development by increasing funding and subsidies to developers and operators.

Among other trends, larger players are choosing to divest smaller properties in secondary markets. At the same time, they’re building for scale in larger urban centres. Operators are also leaving existing business lines to focus on either long-term care or retirement. While these moves led to significant merger and acquisition activity over the last five years, deals have been challenged given the rising rate environment. Buyers are resisting paying a premium for the promise of future income, while sellers are taking a wait-and-see approach, focusing instead on improving operations and cash flow. However, we believe consolidation will continue given the capacity of larger firms to support the higher costs associated with construction and operations.

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  Increasing regulation and higher operating costs should persist in the short-to-medium term

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  Consumer demand for gated communities with on-site amenities should increase

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  Operators will remain focused on increasing occupancy levels and revenues while managing costs

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  Recently announced changes to fast-track the accreditation of internationally educated nurses should help manage current labour supply shortages

Our view is that it will take 18 to 24 months for the sector to normalise with continued support from lenders and the government, helped further by easing in both inflation and interest rate pressures.

¹ BMO-Cushman & Wakefield, “Seniors Housing Market Overview,” June 2023