The seniors housing industry has had to navigate serious challenges during the COVID-19 pandemic. But today? An aging U.S. population, high vaccination rates among older Americans and a lack of new construction means that this sector is poised for steady growth throughout 2021 and into next year.
The fourth annual Seniors Housing Investor and Survey Outlook released in May by JLL Valuation Advisory predicts that the seniors housing sector will see its strongest demand ever during the rest of this year.
According to the report, construction delays from the pandemic will magnify the long-term shortage of supply in this sector. At the same time, Baby Boomers are within about 10 years of moving into seniors housing in greater numbers. JLL says that these factors mean that medium- and long-term investment in this sector remains positive.
“Investors remain bullish on seniors housing and care investments,” said JLL managing director Zach Bowyer. “We anticipate market fundamentals to steadily improve and the market to re-stabilize between two and four years, depending on the location.”
How strong has the seniors housing sector been? JLL says that in 2019, pre-pandemic, this sector had one of its strongest years ever for transactions. And 2020 was set to become another strong year before COVID hit. Despite seniors housing and care transaction volume falling 48 percent year-over-year to $9.2 billion in 2020, 53 percent of respondents to JLL’s survey said they plan to increase their exposure to this sector this year.
The survey found that assisted-living centers are the most desirable investment opportunity this year in the seniors housing sector, with 37 percent of respondents saying that they would target that asset class.
“Dry powder for commercial real estate investments are at an all-time high,” said JLL managing director Bryan Lockard. “Investors are being cautiously selective, as short-term and long-term uncertainty remains for most sectors, with confidence increasing from a successful vaccine rollout within seniors housing communities and declining infection rates.”
There have been challenges for this sector, of course, thanks to the COVID-19 pandemic. JLL reported that seniors housing valuations dropped to an eight-year low last year, with an average price per unit of $141,800, down 16 percent from the same period in 2019.
In other statistical news, the average capitalization rates for seniors housing transactions increased year-over-year by 50 basis points to 6.5 percent in 2020 after reaching an all-time low of 5.9 percent in 2019.
Additionally, after four consecutive years of declines, the average price per bed for nursing homes increased by nearly 20 percent to $88,600 in 2020, marking the second highest annual price point for nursing homes on record.
