Healthcare Opportunity

A greater need for healthcare services is potentially leading to even greater demand for medical facilities.

Griffin-American Healthcare REIT IV was formed to capitalize on the aging of America and the growth of this country’s senior population. As our nation ages, the need for healthcare–related real estate continues to increase.

A Growing Senior Population

The U.S. is growing larger and older at an unprecedented rate. By 2060, the population is expected to increase by 25 percent and will be home to nearly 81 million more people than in 2016.(1) Even more significant is the dramatic surge of people 65 years of age and over in the U.S. Between 2016 and 2060, this sub-segment of the population, known as the “baby boomers,” is expected to nearly double from approximately 49 million to almost 95 million people.(1) As shown in the chart below, average annual office visits rise dramatically as we age, due in large part to the fact that as we grow older, we are more likely to manage chronic medical conditions.

Population Growth of Senior Americans
(Aged 65+) 2016-2060

A Growing Senior Population

Source: “Projections of the Population by Selected Age Groups and Sex for the United States: 2017 to 2060,” U.S. Census Bureau, March 2018.

Average Annual Office Visits
Per Person in the U.S.

A Growing Senior Population

Source: “Projections of the Population by Selected Age Groups and Sex for the United States: 2017 to 2060,” U.S. Census Bureau, March 2018.

Living Longer

Not only are more people getting older, they’re living longer. Increased physician visits, advances in technology, nutrition and lifestyle are helping to improve longevity. Based on research by the Society of Actuaries, a 65- year-old female has more than a 40 percent probability of living to at least the age of 90, while there is a one-in-three chance that one member of a 65- year- old couple will live to at least age 95.(2)

A larger senior population will likely necessitate an abundance of healthcare services and the facilities that house them. These trends have generated sustained demand in the healthcare sector and will continue to for decades to come. The chart below demonstrates how life expectancy increases once an individual turns 65, as opposed to their life expectancy at birth. On average, males are expected to live 18 more years and females are expected to live 20.6 more years after turning 65.

Life Expectancy at Selected Ages, by Sex:
United States, 2016

Life Expectancy at Selected Ages, by sex:

Source: “Mortality in the United States, 2016.” Centers for Disease Control and Prevention/National Center for Health Statistics. December 2017. https://www.cdc.gov.

Job Growth

As spending and demand for healthcare services increases, the sector continues to add jobs. Between 2016 and 2026, the healthcare job sector is projected to grow by 21 percent, generating nearly 4 million new jobs , more than any other industry.(3) Historically, employment in this sector has experienced strong growth, increasing steadily year over year. Healthcare jobs now make up 10.7 percent of total U.S. employment.(4)

Healthcare Job Growth in the U.S.

Healthcare Job Growth in the U.S.

Source: “Employment Projections, Employment and Output by Industry.” Bureau of Labor Statistics, U.S. Department of Labor. November 2017. http://www.bls.gov. 

Healthcare Jobs as a Percentage of Total U.S. Employment

Healthcare Jobs as a Percentage of Total U.S. Employment

Source: “Employment, Hours and Earnings from the Current Employment Statistics Survey (National).” Bureau of Labor Statistics, U.S. Department of Labor. February 2018. http://www.bls.gov. Calculations by Griffin-American Healthcare REIT IV. 

Healthcare Spending

As the population increases, so does spending in the healthcare sector. National annual healthcare expenses reached $3.2 trillion in 2015. By 2026, that number is expected to eclipse $5.7 trillion, and healthcare spending will reach nearly 20 percent of the nation’s GDP.(5)

United States National Health Expenditures

Healthcare Spending

Source: “National Healthcare Expenditure Projections 2017-2026 Table 1: National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years 2010-2026.” U.S. Department of Health and Human Services-Centers for Medicare and Medicaid Services, Office of the Actuary. February 2018. http://www.cms.gov.

Occupancy

Due to the demographic aging of America, healthcare-related real estate enjoys built-in demand drivers that do not exist in other real estate asset classes. Many view healthcare real estate as more stable and recession resistant than other commercial real estate sectors. This can be attributed to consumers’ reluctance to cut personal healthcare spending even in recessionary environments. Therefore, medical office buildings, even through the depths of the Great Recession, enjoyed high occupancy in excess of 90 percent. By comparison, traditional office space occupancy has historically been much lower.(6)

Necessity Based and Recession Resistant

Sources: “Medical Office Research Report.” Marcus & Millichap Research, Second Half 2017. “National Office Report.” Marcus & Millichap Research, 2017.

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Website Sources

(1) “Projections of the Population by Selected Age Groups and Sex for the United States: 2017 to 2060 Table 3.” U.S. Census Bureau. December 2017. http://www.census.gov.
(2) “Life expectancy at selected ages, by sex: United States, 2013.” Centers for Disease Control and Prevention/National Center for Health Statistics, National Vital Statistics System, Mortality. December 2017. http://www.cdc.gov.
(3) “Employment Projections, Employment and Output by Industry.” Bureau of Labor Statistics, U.S. Department of Labor. November 2017. http://www.bls.gov.
(4) “Employment, Hours and Earnings from the Current Employment Statistics Survey (National).” U.S. Department of Labor, Bureau of Labor Statistics. February 2, 2018. http://www.bls.gov. Calculations by Griffin-American Healthcare REIT IV.
(5) “National Healthcare Expenditure Projections 2017-2026 Table 1: National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years 2010-2016.” U.S. Department of Health and Human Services-Centers for Medicare and Medicaid Services, Office of the Actuary. February 2018. http://www.cms.gov.
(6) “Total Personal Health Care Spending by Gender and Age Group – Table 1,” Centers for Medicare and Medicaid Services, National Health Expenditure Data. November 2017. http://www.cms.gov.