While not entirely recession “proof”, the senior housing sector has proven recession resilient, according to the latest data from the National Investment Center for the Seniors Housing & Care Industry (NIC). Speaking before members of press Thursday, NIC executives said that while senior housing has not surged through the recession, it maintained growth and is attracting new capital to the market.
“In terms of investment returns over the three- and five-year period, senior housing has outperformed all other core industrial types [of housing],” said Chuck Harry, NIC director of research and analytics. “Income returns continue to outshine core commercial property types. This is the only sector for rents to not turn negative. They slowed down, but remained positive throughout the downturn. While not recession proof, [the sector is] truly recession resilient.”
The senior housing sector “far outperformed” other commercial real estate property types in annual returns at 7.2% over five years, and 14.2% in a seven-year period, according to NIC’s Investment Guide, second edition, made public on Thursday. That compares with 3.1% and 7.2%, respectively, for the National Price Index (NPI), in part due to lack of volatility.
“[Seniors housing ] behaves differently from other property types,” Harry said. This difference will drive new investment and construction, said NIC President Bob Kramer.
“There was a historic drop, it reached a bottom and is now coming back up. There’s interest in new construction activity,” Kramer said.
Despite the desire to build new communities, financing still remains a challenge, but for those who have an experienced track record or a partnership with an established operator, the outlook is strong.
“We are definitely tracking an uptick and will be following that carefully,” he said.
From an investment standpoint, investors may be unable to ignore the relative success the market has seen.
“If you are required to have diversification in your portfolio, once this knowledge has been established, you can’t not be invested in the sector,” Harry said. “There’s a fiduciary responsibility to be invested once you know this.”
Written by Elizabeth Ecker