Survey: Investor Confidence in Seniors Housing Still High Despite Occupancy Challenges, Slower Transaction Volume

by Jeff Shaw

CHICAGO — Investors are still cautiously optimistic about the seniors housing market even after the sector experienced a slight dip in transaction volume in 2018, according to the results of JLL’s Spring 2019 Seniors Housing Survey.

The Chicago-based commercial real estate services firm surveyed more than 1,000 specialists in the seniors housing and care space. The results point to generally positive sentiment around the market, and notes that while transaction volume reached just over $13 billion in 2018 (a decline over recent years), the total number of transactions was up 41 percent year-over-year.

“There simply weren’t as many large deals with big price tags in 2018 in comparison to the preceding few years,” says Brian Chandler, managing director of JLL Valuation & Advisory Services. “Though there were fewer large transactions, single assets and small portfolios have remained liquid.”

Communities that feature the full continuum of care except for skilled nursing remain the most favored product. Eighty-eight percent of survey respondents said these assets were “very” or extremely” desirable, a 2 percent jump over the last quarter’s survey.

Freestanding nursing facilities remained the least favorite asset type, though only 41 percent of survey respondents said they were “not at all desirable,” a 15 percent improvement over the survey’s winter addition.

“There is still strong demand for high quality, stabilized product,” says Lisa Strope, JLL director of research. “With a record number of units coming online at the end of last year, we believe we have probably hit the trough of occupancy and expect that new product to be fully absorbed in the next few years.”

Looking forward, 57.1 percent of survey respondents said they believe there will be a modest increase in value for age-restricted apartments, while 40.4 percent said they see independent living, assisted living and memory care facilities making modest gains. Of all categories surveyed, only skilled nursing had a majority (51.6 percent) of respondents say they expected to see a modest decrease in value.

“Despite some headwinds that have emerged, there remains a positive outlook, especially for investors with high quality product,” says Chandler. “Demographics continue to be favorable as the baby boomers turn 65 at a rapid clip, and investors are recognizing that now is the time to gain a foothold in the sector.”

To view the survey results, click here.

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