In the first half of 2015, the seniors housing market saw steadily rising demand, acquisition volume and return on investment, according to CBRE’s 2015 Mid-Year Senior Housing Market Insight Review.
Seniors housing demand is driven by the aging of Baby Boomers, a healthy housing market, an attractive spread between borrowing rates and capitalization rates, and relatively limited new development in aggregate since 2000.
Through the second quarter of 2015, the seven-year total return on investment for seniors housing was 10.5 percent. The one-year return was 15.2 percent. These figures are based on property index performance data provided by the National Council of Real Estate Investment Fiduciaries (NCREIF). These returns are considerably higher than that of other major real estate property types, according to NCREIF.
Source: CBRE
During the past four quarters, occupancy has steadily risen, with the second quarter of 2015 ending at 90 percent occupancy.
Acquisition volumes set new records in 2014, with last year seeing 294 transactions totaling approximately $25.5 billion in the seniors housing sector. The total transaction volume by dollar amount in 2014 represented a 130 percent increase over 2013, and almost a 13 percent increase over the transaction volume in 2006, which held the previous record at approximately $22.6 billion across 146 transactions.
Performance in the first half of 2015 remained strong, with approximately $7.8 billion worth of transactions completed in the second quarter alone.
According to CBRE’s report, the Baby Boomers began turning 65 in 2011. By 2029, the remainder will reach ages 65 and above and will account for more than 20 percent of the U.S. population. By 2050, the 65-plus age group is estimated to equal 88 million, nearly double its current population of 47.8 million. Additionally, by 2056 the 65-plus age group is expected to be larger than the under-18 population.
One of the primary trends for the aging population is consistently improving survivorship rates. It is estimated that one in every four 65-year-olds will live to be 90 years old, with one in every 10 expected to live past 95 years of age. According to NCHS Data Brief No. 168, life expectancy at birth for the U.S. population reached a record high of 78.8 years in 2012.
As Americans age during the next several decades, the elderly population will need more formally trained, professional caregivers as a direct effect of chronic diseases, which often affect independence and mobility.
Healthcare is the largest line item in estimated 2015 government spending, with annual U.S. healthcare services expenditures projected to be over $3.2 trillion for the current year.
In the second quarter of 2015, majority nursing care communities made up 46.2 percent of the total seniors housing supply; majority assisted living made up 34.8 percent; majority independent living made up 10.9 percent; and continuing care retirement communities made up 8.2 percent, according to NIC MAP Data & Analysis Service’s Q2 2015 Supply Report of the top 100 metro markets.
—Katie Sloan