Senior Housing Investment Outlook: $2.8 B in sales, stable activity ahead

Senior Housing Investment Outlook: $2.8 B in sales, stable activity ahead

May 1, 2019

The senior housing sector is redefining itself, following several years of robust sales and construction activity. According to a new Real Capital Markets Report, activity slowed in early 2019, but investors are confident in the long term outlook.

RCM’s report incorporates the sentiments of investors across the U.S., as well as statistics from Real Capital Analytics (RCA) and the National Investment Council for Seniors Housing & Care (NIC). The report notes that U.S. investment sales in this sector totaled $2.8 billion in the first two months of 2019, down from $3.0 billion in the same period in 2018. There were $15.2 billion in sales in 2018. Sixty-six percent of investors and other real estate professionals interviewed for the report believe that activity in 2019 will be comparable to the total sales for 2018.

As noted in Senior Living News, investors are looking at operational issues, including focusing on strong operational partners. Given the challenges with shrinking profits and shortages of skilled labor, a strong operating partner is a must. Investors also are looking at the long-term view of this sector.

“Perspective is an important attribute for all commercial real estate investors, including those focused on the senior housing sector,” said Tina Lichens, Chief Operating Officer, RCM. “The sector as we know it today is vastly different from five years ago and rapidly changing. There remains considerable demand and capital in the market, yet investors need to look at the long-term as the market redefines its new normal.”

RCM Senior Housing Outlook

Highlights of the RCM Senior Housing Snapshot are:

  • The investor profile has shifted—with private investors leading the way, followed by institutional investors.
  • Construction activity has slowed—Newly constructed senior housing units declined by 14.8 percent from 2017 to 2018, according to NIC; experts consider this a needed slowdown to reach supply/demand equilibrium.
  • Strong operating partners a must—Over 61 percent of investors agree that a strong operating partner is important due to the challenges finding skilled labor, and managing costs and shrinking profits.
  • Long-term view is key—experts remain bullish on senior housing, but say that investors should look at the long-term, as they work through an oversupply of new construction in many markets.

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