U.S. Seniors Housing & Care Investor Survey and Trends Report | Spring 2017
Total transaction volume in the seniors housing & care sector fell to $14.2 billion last year from $21.9 billion in 2015, and was down by 17% year-over-year in Q1 2017. Last year’s transaction volume still was 5.2% above the average annual volume since 2008, a period that includes two record-setting years.
Pricing per seniors housing revenue unit remained relatively stable last year at $175,800 after steadily increasing since 2007. Nursing care continued to surge, closing 2016 at $101,900 per revenue unit. These trends remained relatively consistent in Q1 2017 with seniors housing averaging $178,000 per revenue unit and nursing care at $93,300.
Weighted average seniors housing capitalization rates increased by 44 basis points to 8.14% in 2016, while nursing care capitalization rates declined by 10 bps to 11.90%.
NCREIF reported total returns for seniors housing as of Q4 2016 at 12.79%, 16.15% and 14.56% over a one-, three- and five-year period, respectively.
Despite the increased capital markets and operational headwinds, interest in seniors housing & care investments continues to grow. Nearly 60% of survey respondents expect to increase the size of their portfolios in 2017 compared with 47% a year ago.
Investor interest is gravitating to the more lifestyle-focused segments of seniors housing, with 40% of survey respondents selecting independent living as offering the greatest opportunity for investment in 2017.
CBRE professionals expect valuations to remain stable in 2017 with a strong long-term outlook. The industry’s fundamentals suggest the necessity for more capacity over the long term, with short-term oversupply in select markets becoming more likely as a result of recent record-setting construction levels.