Senior Housing Real Estate is Best Bet for Development in 2018

Out of all residential property types, senior housing has the best prospects for both investment and development in 2018, according to a cross section of real estate professionals surveyed earlier this year.

“Addressing the residential needs of the population moving through their 60s, 70s, and 80s is creating a spectrum of opportunity for the real estate community,” wrote the authors of the 39th annual Emerging Trends in Real Estate report from PricewaterhouseCoopers and the Urban Land Institute. “That spectrum spans geography and reveals an array of market niches defined by levels of service.”

Researchers with PwC and ULI personally interviewed 800 people, and about 1,600 people responded to a survey sent out by the organizations. More than 60% of survey respondents were affiliated with either a private property owner or developer, or a real estate advisory or service firm. Other respondents represented a variety of organizations, including real estate investment trusts (REITs), lenders and institutional investors.


The survey pegged senior housing as the best bet for residential property investments in the coming year, edging out single family-moderate/workforce properties and multifamily condominiums. These were also the top three development prospects among residential asset classes, with senior housing again taking the No. 1 spot.

Across all commercial/multifamily subsectors, only two property types—fulfillment and warehouse—beat out senior housing as investment and development prospects.


This strong showing for senior housing builds on momentum in recent years. Last year, “age-restricted housing” similarly ranked No. 1 in the residential category. This year, the shift to the broader term “senior housing” appeared to reflect that there are many different types of real estate serving the aging U.S. population.

“Put aside any thoughts of uniformity in the context of the housing needs of America’s seniors,” the report authors wrote. “Tremendous intragenerational diversity exists in our oldest age cohorts.”

While senior housing is dealing with oversupply issues in some markets, the report described the annualized completions rate of 22,000 units as “relatively modest.”

The sector presents compelling returns and investors have been comforted by seeing increased transaction volumes, showing that multiple exit strategies are available, according to an update on the sector provided for the report by the National Investment Center for Seniors Housing & Care (NIC).

More transparency and data about the property type, opportunities to coordinate with other post-acute health care providers, and mounting understanding of the benefits of senior housing are other factors enticing investors, NIC noted.

Top markets 2018

Each year, the Emerging Trends report also ranks markets for their overall real estate prospects, based on survey responses. This year, Seattle nabbed the top spot, up from No. 4 in 2017. Attractiveness to new residents, strong economic growth, availability of debt and equity capital, strong local public/private investment, land opportunities and no state income tax are among Seattle’s strengths.

These were the top 10 markets:

1 – Seattle, Washington

2 – Austin, Texas

3 – Salt Lake City, Utah

4 – Raleigh/Durham, North Carolina

5 – Dallas/Fort Worth, Texas

6 – Fort Lauderdale, Florida

7 – Los Angeles, California

8 – San Jose, California

9 – Nashville, Tennessee

10 – Boston, Massachusetts

A key trend this year was the emergence of secondary markets, as well as markets adjacent to primary or “gateway” markets like New York City or Washington, D.C. One survey respondent emphasized that the larger markets have become prohibitively competitive. Other observations included that Manhattan specifically has seen a surge in construction, and other large metros also have seen new development recently, so investors might be in a wait-and-see mode as the new supply comes online.

Several markets in the top 20 also have seen a boom in senior housing inventory in the last year, including Austin, Salt Lake City, Charleston and San Antonio.

The survey was completed prior to Hurricanes Irma and Harvey, the report authors noted. Even without taking the storm damage into account, Houston dropped 20 spots to No. 60 on this year’s rankings, due to the disruption of the energy industry. The city was ranked No. 1 on the list in 2015.

Written by Tim Mullaney

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