Morgan Stanley Real Estate Investing: Outlook for 2026 and Senior Housing

Real Estate Market Correction and Recovery

• 💡 The real estate market is nearly four years into a correction, with values down approximately 25%.
• 🎯 Conditions are aligning for a transition into a recovery period heading into 2026, with motivated sellers and increased buyer interest.
• ⚠️ Dislocation in capital and occupier markets, particularly due to uncertainty around long-term lease decisions, has impacted industrial real estate and led to rent declines.

Areas of Strength in Real Estate

• 🏠 Residential real estate broadly is considered a strong sector due to its necessity-based nature and under-supply.
• 📈 Within residential, senior housing is identified as a high-conviction strategy, driven by a growing 80+ population.
• 📊 The 80+ population is projected to grow by 50% over the next five years, creating a significant demand gap.

Affordability and Investment in Senior Housing

• 💰 Senior housing is often paid for by savings and asset drawdowns, making it more affordable for seniors who have benefited from home price and stock market appreciation.
• ⚠️ A key question is the affordability for a significant portion of the aging population, with concerns about potential overbuilding if demand doesn't match supply.
• 🛠️ Technological innovation is being adopted to bring down the cost of services in senior housing, potentially making it more efficient than in-home care.

Broader Economic and Social Factors

• 🌍 The real estate market's performance is influenced by broader economic factors, including inflationary pressures and shifts in capital markets.
• 👨‍👩‍👧‍👦 There's a growing social and financial consideration for elder millennials and Gen X who are increasingly involved in caring for aging parents, often incurring financial opportunity costs.