The seniors housing industry has never been stronger, at least according to a new survey that reports a record number of transactions and nearly $20 billion in institutional sales in this commercial real estate segment.
According to the CBRE Senior Housing Investor Survey & Market Outlook, occupancy in seniors facilities is at its highest point since 2007. At the same time, 2015 ranked as a record-setting year for sales and institutional transactions, according to CBRE’s study.
CBRE reported that the seniors housing sector closed another record-setting year in 2015 with 514 institutional transactions closed and $18.7 billion in institutional sales. These numbers came despite a slowdown in the fourth quarter. The increase in volume from 2014 was 4.5 percent.
Plenty of investors remain interested in seniors housing. The CBRE survey found that 58 percent of investor respondents hope to increase their exposure to seniors housing.
The number of seniors housing units under construction had increased from 22,975 at the end of 2012 to 48,903 as of the fourth quarter of last year. With an average development period of 12 to 15 months, a significant portion of this supply will come online this year.
No slowdown on the horizon
Chicago-area CRE experts say that they expect the seniors housing market to remain a busy one as 2016 moves into the summer months. The reasons? There is still plenty of demand for seniors housing facilities in Chicago and its suburbs. And there is enough uncertainty with the U.S. stock market and other investment opportunities to convince nervous investors that seniors housing remains one of their safest bets.
Jason Stroiman, president of Chicago’s Evans Senior Investments, isn’t surprised that seniors housing remains such a strong segment. He points to the unpredictable nature of the stock market, with its ups and downs, as yet another possible positive for the seniors housing industry.
“The presence of volatility in the stock market may drive investors to the predictable returns of real estate investing,” Stroiman said. “Seniors housing was proven to be the most recession-proof real estate class during the Great Recession. As overseas investors pull out of global equity markets, they could potentially find a safe haven in U.S. real estate investment vehicles until the market turmoil plays out.”
Of course, the U.S. population continues to age, which is a critical driver for seniors housing construction and sales.
“The seniors housing market continues to show great promise as a long-term growth industry due to the underlying demographic fundamentals implicit in future demand,” Stroiman said.
Amenities that are in demand
Seniors housing facilities today, of course, bear little resemblance to the facilities of even a decade ago. Many seniors today are demanding the type of amenities you’d see in an upper-end hotel.
Chicago’s The Habitat Companies is the largest property manager for the Chicago Housing Authority, including many of its seniors housing facilities. And while public housing does differ from private housing, the residents of both types of seniors housing properties are increasingly looking for some of the same types of amenities.
Charlton Hamer, vice president for public housing for The Habitat Company, said that seniors today understand the negative impact of living a sedentary lifestyle. So they are increasingly looking for fitness rooms that can help keep them moving.
“Seniors want fitness equipment and open areas in which to exercise,” Hamer said. “This includes popular fitness classes such as Zumba. This space has yet to take precedence over game rooms, but is significant enough to acknowledge the shift.”
As in many apartments or hotels, the common areas of seniors facilities has grown in importance, Hamer said. The goal is to get seniors out of their rooms and interacting with their fellow residents in public spaces.
“There is a significant focus on common-area space that is inviting for social events, lounging and resident interaction throughout the day,” Hamer said. “As the weather gets warmer, residents also desire this social interaction outside in a well-manicured green space or designated seating areas in front of the building where there is great foot traffic to ‘people watch.'”
Chuck Taylor, director of operations with Lemont, Illinois-based Englewood Construction, agreed that common areas are becoming the hearts of modern seniors housing facilities. This is inspiring existing facilities, too, to take on renovation projects to modernize cafeterias, game rooms and lobbies.
“Existing seniors housing communities are revamping their amenity spaces to create more gathering places for extended family to visit residents,” Taylor said. “Common areas are being opened up and infused with more of a modern, welcoming feel, similar to what you might find in a boutique hotel lobby.”