Components of Market Analysis for Seniors Housing and Care Market studies are a critical component of the seniors housing development planning process. They’re hard to get right and, unfortunately, extremely easy to get wrong. In this multi-part blog series, I’ll provide the nuances, techniques, and best practices for making your market study a successful tool that helps prevent major project failures and uncover significant opportunities. First up: The integral components of a successful market study.
Over the past few years, public buyers, dominated by the public REITs, have been the dominant player buying seniors housing and care properties. That changed in 2016, when higher costs of capital limited purchases by public REITs. Consequently, acquisitions by institutional buyers and private buyers (including private REITs and partnerships) accounted for the majority of dollar volume in 2016. With public REITs relatively quiet in terms of closed deals, volume dropped significantly compared to 2015. However, smaller dollar transactions kept 2016 active.
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 third quarter of 2016, the total annual return for this sector has been slowly trending down since mid-2014.
From a regulatory perspective, 2016 was certainly a busy year in seniors housing and care. From new bundled payment models to revised participation requirements, the Centers for Medicare and Medicaid (CMS) rolled out new guidance and rules at a rapid pace. With a new administration and a new leader at the helm of Health and Human Services (HHS, the agency under which CMS operates), 2017 could turn out as interesting as 2016. Here are the regulatory areas I'll be keeping my eye on in the next year.