NIC Notes

Insights in Seniors Housing & Care

By: Beth Mace  |  July 18, 2018

Seniors Housing Annual Total Investment Returns Equal 12.79% in Q1 2018

Economic Trends  |  Senior Housing

First-quarter investment return data for the NCREIF-reported seniors housing properties equaled 2.14%, composed of a 0.79% capital return and a 1.36% income return. The annual total return through the first quarter of 2018 was 12.79%, overshadowing the NCREIF Property Index (NPI) result of 7.12% and the apartment result of 6.38%. However, at 13.53% industrial total returns outpaced seniors housing.

Despite the relatively strong showing, the total annual return for seniors housing has been trending down since mid-2014 when it peaked at 20.37%.   This pattern can also be seen in the broader NPI index and is due to the appreciation return which tends to slow at this point in the real estate cycle.

Looking more closely at the components of total returns, appreciation returns for seniors housing exceeded all major property types on a 10-year basis.  Hotel and office both experienced negative capital returns over this period, while seniors housing had a 3.73% capital return.   More recently, the capital return was 6.94% on a one-year basis, dwarfing all other property types except for industrial, which has benefited from e-commerce which has increased demand for last-mile warehouse space.

With the exception of the hotel sector, seniors housing income returns have also exceeded the NPI as well as the other main property types on both a one-year and a ten-year basis.

These performance measurements reflect the returns of 104 seniors housing properties, valued at $5.3 billion in the first quarter.  This is the first quarter that the market value of the NCREIF universe of seniors housing has exceeded $5 billion.

About Beth Mace

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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