Western Investor: Senior Housing Availability Takes a Nose Dive – demand pressures, with very little new supply
Highlights from the article, with corrections to the article highlighted in italics:
Despite a willingness to pay rents three to four times higher than the conventional apartment market, British Columbia’s 370,000 senior citizens are facing a rental crunch, according to new Canada Mortgage and Housing Corp. (CMHC) data.
The rental vacancy for seniors’ housing units across B.C. fell to 4.7 per cent this year, down from nearly 10 per cent two years ago and 6.3 per cent in 2017. In Metro Vancouver, just 4.6 per cent of the 7,586 private seniors’ housing units are vacant, compared to more than 9 per cent a year ago.
Only 500 new privately built “independent living spaces” for seniors have been built across B.C. in the past year, CMHC notes, and half of these were in the Okanagan.
These rents are well above the conventional apartment market, which averages $1,099 in B.C. and $1,400 across Metro Vancouver, according to CMHC’s latest data.
About a fifth of senior tenants require staffed medical and housekeeping assistance, which pushes average Metro rents above $6,900 per month, CMHC reports.
“Few developers are building new seniors’ rentals because of the delays in getting permits,” said Candy Ho, vice-president of communication at Element Lifestyle Retirement Inc. (TSX-V:ELM), which is completing Vancouver’s only new seniors’ complex, the Opal on Cambie Street. “There is a huge demand and very limited new supply.” Note: most companies in the retirement living industry focus on shareholder return via acquisition of existing underperforming assets. Development requires both patience and deep experience to manage the process effectively. As such, many in this industry shy away from it. However, this is the only real way to meet the tsunami wave of demand posed by demographic pressures in the baby boomer/senior population. Element is positioned to grow sustainably with a business model that capitalizes on its leadership’s decades of development expertise, and with its mandate / vision to add value on a societal level.
At the Opal, a luxury seniors’ residence with 56 rental units that opened its office May 20, rents range from $10 to $12 per square foot. That pencils out to an average of $5,980 per month for a one-bedroom and north of $9,300 for a two-bedroom suite.
Ho said 20 per cent of the Opal’s rental units were registered with seniors in the first week it launched rental reservations. Element has also sold 27 condominiums in the Opal complex at an average of $1,300 per square foot.
It has taken 4.5 years, so far, to get the Opal through Vancouver’s rezoning, development and building permit process, and Ho added that it won’t open until Spring 2019.
There is no guarantee that rentals booked today at Opal will not rise by the time the project completes, however, as rental rates are driven by market conditions.
Seniors’ residences are not subject to the annual rate increase of B.C.’s Residential Tenancy Act, which caps conventional rent increases at 3.7% this year.
“Rents at Opal will be adjusted to market rental rates at the time,” Ho said.