Dave Rodgers, managing director at Raymond James Equity Research, joined the REIT Report podcast to discuss the outlook for health care REITs, noting that the sector—and senior housing in particular—is one of the most attractive areas for investment across the REIT industry today.
A large and wealthy older generation, and limited supply, provide a “really good runway for strong organic growth” in senior housing, marked by rent growth and margin expansion, Rodgers said. Over the next decade, “we don't think it's a stretch to think that maybe this business can grow at 10% annually,” he added.
Senior housing occupancy nationwide is around 90% today, Rodgers pointed out. He noted that older, wealthy individuals considering senior housing options are more interested in the lifestyle component than ever before. “They really want to benefit from living in one of these facilities.” At the same time, enhanced technology is improving the resident experience and reducing labor intensity in operations.
Raymond James is also constructive on the skilled nursing space due to underlying fundamentals, as well as on outpatient medical, Rodgers said. The combination of more institutionalized operators in the skilled nursing business, alongside improved occupancy, is driving solid coverage levels for the REITs that own these assets, he noted.