Senior Housing Projects Still Hold Investment, Development Appeal Despite Ongoing Headwinds

Senior housing is still among the popular product types for new investment and development in 2022 despite lingering headwinds related to rising expenses and staffing.

Respondents to a recent real estate trends report from PricewaterhouseCoopers (PwC) and the Urban Land Institute (ULI) identified senior housing as between “fair” and “excellent” for new investment and development.

The report’s respondents noted senior housing as their No.9 investment prospect and their No. 8 prospect for new development. Respondents for the 2023 report were slightly more bullish on the sector compared to those in last year’s.


For this year’s report, ULI and PwC researchers personally interviewed 617 people and garnered survey responses from 1,450 others. Respondents primarily represented real estate developers, real estate service or advisory firms and private equity.

Source: PricewaterhouseCoopers and the Urban Land Institute

Overall, the ULI report notes some top markets to watch for real estate investment in 2023, with the top three markets including: Nashville, Tennessee at the top spot followed by Dallas, Texas / Fort Worth, Texas and Atlanta, Georgia in the third spot.

Source: PricewaterhouseCoopers and the Urban Land Institute

While headwinds around rising expenses and labor costs have remained consistent throughout 2022, the sector is also being propelled by strong demand and the impending influx of the baby boomer generation..


“The demographics supporting senior housing cannot be denied,” wrote the section’s authors, who were with the National Investment Center for Seniors Housing & Care (NIC). “Looking ahead, many reasons exist to be optimistic about the outlook for senior housing, but the path forward may be a bit bumpy due to the prevailing winds in the broader economy.”

A slowdown in inventory growth and new starts due to sustained high construction costs, and continued labor pressures — mixed with inflation and interest rates — could still pose challenges for the industry moving into 2023.

Wellness integration, a trend seen in recent years in senior living, could add a “significant competitive advantage” to operators as they position themselves to add value on a specific product type, the report noted.

Operators have also spent recent years post-Covid integrating more health care services into their operations, from home health to operators looking to partner with health care organizations to offer clinical services.

“Once senior housing is fully recognized as part of the health care continuum, senior housing operators will be able to participate in the revenue streams associated with a capitated risk-sharing model of care,” the report reads.

With the lowest new senior living units under construction since 2015, occupancy gains could continue to provide a tailwind in the future, the report noted.

A total of 78% of units placed back on the market within senior living since the pandemic began have been reoccupied as the sector saw its sixth-straight quarter of occupancy growth earlier this year, according to NIC data

Higher interest rates make it harder for new development to get underway and projects are getting harder to make work due to the rising cost of debt financing and building materials.

Other external influencing factors that will influence the strength of move-ins and demand cited in the report for 2023 include:

– Overall economic performance

– Consumer confidence

– Rate of inflation, consumer price index (CPI)

– Interest rates

– Pace of sales of residential housing

– Pent up demand for senior living as seen in 2022

– Development pace

– New competition

– Local market area demand and supply pressures

Solving labor issues further in 2023 could rely on operators offering flexible scheduling, higher wages and improving overall work environments, the report notes.

But even as pressures remain, long term opportunities in senior living are on the horizon. The 10-year return for senior housing was the strongest property type outside industrial cited by the NCREIF Property Index (NPI) investment return data, with net property income returns for senior housing (5.47%) surpassed the NPI (4.83%) while the appreciation return was 4.49% and slightly less than NPI at 4.61%, the report shows.

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