Investor appetite in senior housing is growing while occupancy levels continued to rise across property types, according to data released Thursday by the National Investment Center for the Seniors Housing & Care Industry (NIC).
Presenting the release of its third quarter NIC MAP 31 data in conjunction with NIC’s national conference in Chicago, several analysts from the senior housing data firm say there is positive movement within the industry across various segments.
Occupancy levels were among the “positive” strides recorded for the third quarter, as both majority independent living and majority assisted living properties in the top 31 metro areas trended upward during the quarter compared to year-ago levels.
As of the third quarter 2013, majority independent living occupancy was 89.4%, up from 88.8% in the same period in 2012. For assisted living, occupancy was 89.1% for the quarter, an increase from the same period a year ago when occupancy was 88.7%.
Overall, senior housing occupancy was 89.3% among the primary markets that make up NIC’s MAP 31 metros, up from 89% in the second quarter of 2013, whereas the secondary markets for MAP 32-100 areas was up to 90.3%, compared to 90.2% during the same period a year earlier.
Across all markets, senior housing occupancy in the top 100 metros was 89.7%.
Investor interest in senior housing is also high, according to NIC’s analysis, as transaction volume eclipsed $2.9 billion in the third quarter of 2013.
For the first time ever, senior housing was the most attractive property investment in 2013, topping a list that included other property types such as medical office, industrial, multifamily and retail.
“The private market is finally starting to see seniors housing as an attractive property type,” said Jeff Theiler, an analyst for Green Street Advisors.
The $2.9 billion transaction volume represents closed deals only for the third quarter and is on par with its year-ago level of $2.8 billion during the third quarter of 2012.
“There were 476 properties traded in the third quarter alone,” said Chuck Harry, managing director at NIC.
The third quarter was marked by large deals coming from real estate investment trusts, such as Health Care REIT’s (HCN) $173 million Merrill Gardens deal, under which HCN acquired 38 properties comprising 4,519 units.
The deal traded at $191,000 per unit, which is well above the typical transaction for senior housing of $110,000 per unit, according to NIC data.
Despite the nearly 500 properties traded in the third quarter, the number of transactions will start to “level off” as REITs find out what their true cost of capital is, said Theiler.
“REITs are still given the green light by public equity markets to invest in seniors housing,” he said.
Even though various factors such as interest rates, existing home sales and affordability look to influence how many seniors will be able to sell their homes and move into senior housing properties, high absorption will look to ease some of the worries associated with inventory growth within the next year.
Senior housing absorption was 1.9& during the third quarter of 2013, compared to 1.8% during the second quarter. Absorption was down, however, from the third quarter of 2012, when it was 2.3%.
“One of the big worries is supply that will be coming onto the market,” said Theiler. “We would need a large absorption to keep occupancies where they are in light of new supply.”
Written by Jason Oliva