Kayne Anderson Real Estate Advisers is well-situated to see the demographic shifts affecting demand for alternative property types right outside its window. The firm, which invests largely in medical office and senior housing, is based in Boca Raton, Florida, a state that has seen a large influx of seniors escaping both the cold and heavier tax levies elsewhere in the country.
“The thing that we’ve always looked at is what everyone’s waking up to at this point in time: the tsunami of aging people and what the implications of that are,” chief executive Al Rabil says.
That shifting demographic has led the firm to invest along the eastern seaboard and in the south-western US – states with population inflows – and in markets where there is no equilibrium of supply and demand for decades, such as Boston, New York and Charlotte, North Carolina.
In medical office, the push for healthcare systems to provide care at scale and outside of traditional hospitals has led to a boom in need for the property type. Demographics are also driving that demand, with an aging population that requires more doctors’ visits for elderly care.
Those demographic trends are not new, but Rabil says investors are now starting to understand the bottom-line impact for real estate investing. He expects deal velocity to continue increasing in 2018, with long-duration buyers seeking diversification in core properties.
“What’s changed is that once we have stabilized assets, the number of investors interested is so dramatically different than a year ago, and you’re going to see that trend continue for the foreseeable future,” he says. “From an opportunity set perspective, we’re very early in the cycle – I’d say the second inning.”
“As institutional dollars continue to pour into medical office in 2018 and well beyond, you’ll start to see banks and other money centers become far more savvy about lending into the medical sector,” Rabil said.
“As you have equity dollars flow into these sectors, you’ll have increased debt dollars, but you won’t be overrun by supply because when you look out to the next 15-20 years, this demographic tailwind is not going to abate anytime soon.”