NIC Notes

Insights in Seniors Housing & Care

By: Beth Mace  |  June 09, 2017

Seniors Housing Returns Moderate, but Continue to Outpace Broader Property Index

Senior Housing

Investment returns for seniors housing historically have outpaced the overall NCREIF (National Council of Real Estate Investment Fiduciaries) Property Index (NPI), a property-level index that tracks investment return performance for commercial real estate. But while seniors housing returns outperformed the NPI in the first quarter of 2017, the total annual return for this sector has been slowly trending down since mid-2014.

First-quarter investment return data for the NCREIF-reported seniors housing properties equaled 3.62%, composed of a 2.25% capital return and a 1.37% income return. The annual total return through the first quarter of 2017 was 12.05%, overshadowing the NCREIF Property Index (NPI) result of 7.27% and the apartment result of 6.73%. However, industrial total returns slightly outpaced seniors housing at 12.18%.

Despite the relatively strong showing, the total annual return for seniors housing has been slowly trending down since mid-2014 when it peaked at 20.37%. The annual appreciation return has also been slowing and, at 5.91%, was the lowest for any trailing four-quarter period since mid-2014, while the 5.87% income return was below its long-term average of 6.78%. The slowdown in annual income and capital returns has also been evident within the broader NPI.

On a 10-year basis, total returns for seniors housing exceeded both the NPI and apartments by more than 400 basis points.  The difference with hotel was even larger at 675 basis points (11.13% versus 4.38%), while the difference with retail was the smallest of the other five main property types at 297 basis points (11.13% versus 8.16%).

These performance measurements reflect the returns of 86 seniors housing stabilized properties, valued at $4.1 billion in the first quarter.  This is the first quarter that the total value of the NCREIF universe of seniors housing exceeded $4.0 billion, roughly 1% of the overall NPI, which was valued at $533.8 billion in the first quarter.

 

Property Investment Returns for the Period Ending 1Q 2017

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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