When ULI and PwC released its annual Emerging Trends in Real Estate report late last year, seniors housing commercial real estate received high marks by industry professionals surveyed.
Of all multifamily property types, the sector received the highest “buy” rating, with 50.8 percent of respondents saying it’s the right time to acquire seniors housing, while 40.2 percent said those assets should be held and only nine percent suggesting investors sell.
Large institutional investors reportedly have growing interest in the property type – as of last year’s second quarter, there was $14 billion put toward seniors housing acquisitions through the prior 12 months. There are several reasons for the interest, including a population between the ages of 82 to 86 increasing by 29 percent between now and 2025, stronger returns than nearly every other property sector, an increase in transparency for the asset class, and other important factors. The report says that the two main disadvantages the sector has is a lack of supply and a labor shortage – if that was all retail landlords had to worry about now, for example, they would likely be pretty happy.
Beth Burnham Mace, chief economist at NIC (The National Investment Center for Seniors Housing & Care), responded to the findings, saying: “A part of the mission at the National Investment Center for Seniors Housing & Care (NIC) is to increase transparency through better and more available and reliable data, so this report is a validation that these efforts are having an impact on investment in the seniors housing industry.”
The organization regularly releases reports on the health of the seniors housing commercial real estate sector, even when the numbers aren’t as favorable as some landlords might like.
NIC reported that during the fourth quarter, seniors housing occupancy was at 88.8 percent, the same as the third quarter and down 0.7 percent from the same year-ago period. Burnham Mace attributed more product coming to the market for the occupancy lag. There were just over 6,000 seniors housing units that started construction during the fourth quarter, a majority of them assisted living.
As a result, rent growth was also on the decline. The 2.6 percent asking rent growth increase during the fourth quarter was 0.1 percent below the prior quarter and down from 3.7 percent during the same year-ago period.
However, unless aging Baby Boomers decide to go some other housing route when they hit their 80s, such as a trend of moving in with their children, an uptick in construction is probably needed for a coming wave of demand, and those vacancy numbers are sure to tighten.
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