On the heels of record prices in 2015 for two senior housing property types, new data shows 2016 prices surpassed their previous records for skilled nursing and assisted living properties, rising 15% and 2% respectively, according to a report published Wednesday by Irving Levin Associates.
The average skilled nursing facility price per bed shot up to a new record of $99,200, which is 15% higher than in 2015, according to The Senior Care Acquisition Report, 22nd Edition, 2017.
Assisted living also topped its 2015 numbers in price per unit. In 2016, assisted living price per unit reached $193,650, which is an increase of 2% from 2015.
“After records set in 2015, especially in the skilled nursing market, we didn’t expect to see values on their upward trend, especially when the transaction volume appeared to slow,” Stephen M. Monroe, editor of the report, said in a press release. “The big surprise, again, was the significant increase in the average skilled nursing facility price per bed when labor costs are expected to rise and reimbursement is expected to tighten.”
The average price of independent living per unit also increased, though the jump was not record-breaking. Specifically, the average price per unit of independent living rose 18% increase from 2015 to $228,150.
In 2016 there were 337 publicly announced acquisitions in the senior housing and care market, totaling approximately $14.4 billion. That’s 1% higher than in 2015, the report found.
When it comes to capitalization rates, SNFs remained flat at 12.2%, which is 10 basis points above their record low. Assisted living, however, saw a spike from 7.7% in 2015 to 8.5% in 2016. And independent living increased 20 basis points from 6.96% in 2015 to 7.2% in 2016, the report said.
Even with much uncertainty surrounding changing policies and regulations under the Trump administration, experts remain optimistic about senior housing sector.
“Investors are betting on the sector and continue to believe that demographics will support strong valuations in the long run, even if interest rates rise,” Monroe said.
Written by Alana Stramowski