Insights in Seniors Housing & Care
Institutional investment interest in seniors housing and care is strong and growing. In the first quarter of 2015, transaction volume totaled $19.4 billion on a four-quarter moving average, with more than 122 deals closing. Investor interest can be traced to many factors. Foremost among these factors is its investment track record: both appreciation and income returns for seniors housing have consistently dwarfed other property type returns for more than ten years. On a ten-year basis, total returns as reported by NCREIF were more than 14.1%; this compares with all property types of 8.4%.
Seniors housing is also an asset type whose demand drivers are compelling, intuitive and understandable. Indeed, the AARP estimates that the ratio of caregivers aged 45 to 64 years old relative to the population of 80 years and older will fall from 7:1 in 2010 to 4:1 in 2030 and to less than 3:1 in 2050. As this ratio declines, the need for care and housing of America’s seniors will only grow.
Market fundamentals for seniors housing are also generally improving and continue to benefit from the expanding national economy, rising household net worth, and steadily recovering housing market. Occupancy levels are well above recession lows and rent growth is positive. In the first quarter of 2015, occupancy levels for seniors housing were above 90%, up sharply from the low point of 86.9% reached in early 2010.
The sector is also better understood today due to its increased transparency. Investors can now more easily compare the sector’s opportunities and risks with other commercial real estate sectors (office, retail, industrial, hotel and multifamily). Supply/demand market fundamentals can be assessed through the NIC MAP Data & Analysis Service®, property level investment returns can be compared through NCREIF and transaction pricing and trades can be followed through RCA and NIC MAP®. In fact, the Institutional Real Estate Inc.’s Annual Plan Sponsor Survey has shown seniors housing to be among the more attractive commercial real estate investments.
Lastly, the sector also offers investors portfolio diversification benefits, especially for investments in assisted living properties with its need-based characteristics; when the necessity arises, it is often difficult to postpone a decision to move into assisted living
Beth Burnham Mace is a special advisor to the National Investment Center for Seniors Housing & Care (NIC) focused exclusively on monitoring and reporting changes in capital markets impacting senior housing and care investments and operations. Mace served as Chief Economist and Director of Research and Analytics during her nine-year tenure on NIC’s leadership team. Before joining the NIC staff in 2014, Mace served on the NIC Board of Directors and chaired its Research Committee. She was also a director at AEW Capital Management and worked in the AEW Research Group for 17 years. Prior to joining AEW, Mace spent 10 years at Standard & Poor’s DRI/McGraw-Hill as director of its Regional Information Service. She also worked as a regional economist at Crocker Bank, and for the National Commission on Air Quality, the Brookings Institution, and Boston Edison. Mace is currently a member of the Institutional Real Estate Americas Editorial Advisory Board. In 2020, Mace was inducted into the McKnight’s Women of Distinction Hall of Honor. In 2014, she was appointed a fellow at the Homer Hoyt Institute and was awarded the title of a “Woman of Influence” in commercial real estate by Real Estate Forum Magazine and Globe Street. Mace earned an undergraduate degree from Mount Holyoke College and a master’s degree from the University of California. She also earned a Certified Business Economist™ designation from the National Association of Business Economists.
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