Senior Housing Investment Returns Continue to Drop

The industrial sector continues to outperform senior housing when it comes to investment returns—but senior housing continue to outpace the broader investment return performance of commercial real estate properties.

Specifically, the annual total senior housing return through the first quarter of 2018 was 12.79%, which beat the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index (NPI) result of 7.12%.

Still, at 13.53%, industrial total returns exceeded those of senior housing, according to data recently analyzed by the National Investment Center for Seniors Housing & Care (NIC).

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“The NCREIF data for the first quarter of 2018 shows that seniors housing total investment returns continue to outpace the broader investment return performance of commercial real estate properties and multifamily,” NIC Chief Economist Beth Burnham Mace told Senior Housing News. “This has been the case for more than 10 years. It is important to note, however, that these returns reflect the performance of institutionally-owned properties, which tend to be best in class properties that are managed by relatively strong operators.”

Senior housing’s total annual return has been dropping for approximately four years. It hit a high of 20.37% in the middle of 2014.

First-quarter 2018 investment return data for the NCREIF-reported seniors housing properties totaled 2.14%, comprising a 1.36% income return and a 0.79% capital return.

Senior housing appreciation returns, meanwhile, were higher than all major property types on a 10-year basis. Hotel and office both experienced negative capital returns during this time, but senior housing experienced a 3.73% capital return.

The NPI is a property-level index that tracks commercial real estate’s investment return performance. These performance measurements reflect the returns of 104 senior housing properties, which were all together valued at $5.3 billion in the first quarter of this year. The quarter represented the first ever that the market value of the NCREIF universe of senior housing was higher than $5 billion, according to NIC.

Written by Mary Kate Nelson

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