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| Bryan J. Lockard |
CHICAGO,
IL – Green
shoots are starting to emerge in the capital markets, benefiting the seniors
housing sector of the industry.
The
underlying market fundamentals continue to bounce back from the lows
experienced during the COVID-19 pandemic with occupancy increasing,
construction starts slowing and the market showing signs of stabilization and
growth, according to JLL’s
seventh annual Seniors Housing and Care Investor Survey and Trends Outlook.
Of the investors surveyed for the report, 63% of
respondents indicated they would increase their investment exposure to seniors
housing in 2024, which is up 19 percentage points from 2023.
When asked where the biggest opportunity in
the sector lies, 41% will focus on the assisted living segment of the industry,
up 10 percentage points from 2023, followed by independent living and active
adult communities.
Key themes addressed in the report include:
Occupancy Rebound: Occupancy
rates have notably increased in both primary and secondary markets, with an
average rate rising six percentage points to 86.3% in Q4 2023 since the
market’s low point in Q1 2021.
Investor Confidence: Despite a
general slowdown in transaction volumes due to higher financing costs and
market uncertainty, investor interest in seniors housing remains strong. This
is partly due to positive demographic prospects and the attraction of higher
yields from seniors housing and other alternative asset classes.
Capitalization Rates: Capitalization
rates for seniors housing have expanded by approximately 200 basis points from
the market peak before the Fed started raising interest rates, reaching around
6.75% on average by Q4 2023, reflecting higher lending costs.
Construction and Demand: The
report highlights a slowdown in inventory growth, with construction starts
halving compared to pre-pandemic levels. This reduction supports the
performance of existing properties, further supported by the aging baby boomer
generation.
Private Capital Engagement: Private
buyers have become more dominant in the seniors housing assets market, stepping
up as institutional liquidity has seen a downtrend. In 2023, private buyers
comprised 85% of the buyer composition up 11 percentage points year-over-year
and marking the highest share in recent cycles.
Market Diversity: While
there is an overall positive trajectory across the board, recovery levels and
performance vary across locales, with seniors housing fundamentals in markets
like San Antonio and Phoenix showing full recovery, and others, such as the Bay
Area and Chicago, still trailing.
"The seniors housing and care industry is on a
striking path of growth, driven by demographic changes, strategic investment
opportunities and a marketplace that continues to adapt post-pandemic,” said Bryan
J. Lockard, Executive Managing Director and Head of Healthcare &
Alternative Real Estate at JLL Value and Risk Advisory.
“We
are witnessing a conscientious investment community, keen on harnessing the long-term
potential this sector promises."
As the industry looks ahead, there is a bright future
for seniors housing contingent on certain economic conditions. With the
expectation that the 75+ demographic will nearly double by 2045, the demand for
seniors housing is set to surge, presenting substantial opportunities for
investors with a long-term outlook.
JLL
Value and Risk Advisory is the essential guide to the changing face of real
estate values and risk. Our expert value and risk specialists are here to help
investors and lenders identify, mitigate and monitor risk, and optimize real
estate values across all sectors and geographies.
More
than 2,500 experts in over 35 countries analyze $3 trillion of real estate,
delivering actionable risk and value insights, so investors and lenders stay
ahead in the market. A global community of sector-based specialists, the team
delivers tailored client solutions for your real estate and business asset
interests, giving an accurate picture of value and risk across any opportunity.
For
more news, videos and research resources, please visit JLL’s newsroom.
CONTACT:
Kristen Murphy
JLL Director, Public Relations
Phone: +1
617 848 1572
Email: Kristen.Murphy@jll.com
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