Investor Interest in Senior Housing Cools as Cost of Debt Rises

Investors are not as interested in senior housing as they were at the tail end of 2021, nor are they as interested in active adult. Even so, almost half say they still plan to increase their exposure to senior living this year.

That’s according to the latest investor trends and outlook survey from JLL Capital Markets, which was released Tuesday. In the survey, 44% of respondents said they might increase exposure to senior housing in the next 12 months, while an additional 44% would not change their exposure within senior living in 2023. Just 12% said they would decrease their holdings in the space.

Although 88% of the investors said in the fourth quarter of 2022 they would either grow or hold senior housing investments this year, that represents a waning of interest from the same period in 2021, when 96% said the same.

JLL 2023 Seniors Housing & Care Investor Survey and Trends Outlook

Almost a third of respondents — 31% — said they see assisted living as the most sought-after investment opportunity in 2023. Slightly more than a quarter of respondents said they see skilled nursing as the most sought-after investment opportunity this year, followed by active adult at 23%.

That represents a cooling of interest in the active adult sector, which was identified as the most sought-after investment opportunity by respondents to a previous JLL survey in the fourth quarter of 2021.

Current concerns for investors include capital markets and interest rates, which were identified by 60% of the respondents as top challenges ahead. Dry powder for senior housing remains at an all-time high, but the bid-ask spread is still challenging given the rising cost of capital, according to the survey.


Institutional investors now make up a smaller share of senior housing buyers than before the pandemic. About 16% of buyers today are institutional investors, in 2019 that share was 28%.

The third quarter of 2022 represented the slowest quarter for senior housing transactions since the second quarter of 2020 when the pandemic was just ramping up, according to NIC MAP Vision data the survey’s authors cited. Investment volumes totaled $761 million during that period, representing a decline of 85% compared to the same quarter in 2021.

While the uncertainty ahead could lower the sale volumes in the short-term, expected revenue growth within senior living and anticipated demographic shifts over the coming decade still “bodes well for its long-term stability,” the survey’s authors wrote.

With rising cost of debt also comes increasing capitalization rates, but demand should remain in the sector as construction remains limited and occupancy figures rise. Since 2019 construction starts in senior housing have slowed, while available units fill up.

That’s evidenced by a sharp decline in December of 2022 with permits reported by NIC Map Vision found 18 projects totaling 2,700 units were found, compared to 94 projects in December of 2021.

“While financial conditions are challenging for starting construction in the coming months, demographic patterns show opportunity for continued seniors housing development,” the report’s authors noted.

In the last 12 months, the JLL Valuation Index found that on average, majority memory care, IL and AL respondents were at 93% average occupancy, while CCRC average occupancy was at 88%, in the last 12 months.

In terms of revenue growth, respondents reported average revenue growth projections of 6.8% in AL, 6.7% in memory care, 6.3% in IL and 5.7% in active adult over the next 12 months. But that’s contrasted with projected expenses increasing 5.6% in memory care, 5.4% in AL, 4.8% in IL and 4.5% in active adult over the next 12 months, the survey reports.

Positive gains on rent growth are also another encouraging sign for the industry after a nose-dive due to the Covid-19 pandemic, as noted by NIC Primary and Secondary Markets data that found rents were up 4.9% on an annual basis, compared to 1.5% at the start of 2021.

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