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Seniors Housing Posts Strong Property Investment Returns

Investment returns for seniors housing historically have outpaced the overall NCREIF (National Council of Real Estate Investment Fiduciaries) Property Index (NPI), a property-level index that tracks investment return performance for commercial real estate. But while seniors housing returns outperformed the NPI in the third quarter of 2016, the total annual return for this sector has been slowly trending down since mid-2014.

Investment Returns Relatively Strong but Down from 2014 Peak

NCREIF reported that the investment returns for seniors housing properties tracked by the organization in the third-quarter 2016 equaled 2.22% (composed of a 0.80% capital return and a 1.41% income return). Seniors housing’s annual return through the third quarter of 2016 was 13.11%. It outperformed both the NPI (9.22%) and apartments (8.46%).

Despite the relatively strong showing, the total annual return for seniors housing has been slowly trending down since the mid-2014 peak of 20.37%. The annual appreciation return was 7.16% in the third quarter, the lowest for any trailing four-quarter period since early 2013. The income return remained near historic lows of 5.66% in the third quarter. The slowdown in annual income and capital returns has also been occurring for the broad NPI.

On a 10-year basis, total returns for seniors housing exceeded both the NPI and apartments by more than 400 basis points. These performance measurements reflect the returns of 78 seniors housing stabilized properties valued at $3.5 billion as of the third quarter 2016.

Property Investment Returns for the Period Ending 3Q 2016

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About the Author

Beth Burnham Mace

Beth Burnham Mace is the Chief Economist and Director of Outreach at the National Investment Center for Seniors Housing & Care (NIC). Prior to joining the staff at NIC, she served as a member of the NIC Board of Directors for seven years and chaired NIC’s Research Committee. Ms. Mace was also a Director at AEW Capital Management and worked in the AEW Research Group for 17 years. Prior to joining AEW in 1997, Ms. Mace spent ten years at Standard & Poor’s DRI/McGraw-Hill as the Director of the Regional Information Service. She also worked as a Regional Economist at Crocker Bank, the National Commission on Air Quality, the Brookings Institution and Boston Edison.

Ms. Mace is a member of the National Association of Business Economists (NABE), the Urban Land Institute (ULI), ULI’s Senior Housing Council and New England Women in Real Estate (NEWIRE/CREW). In 2014, she was appointed a fellow at the Homer Hoyt Institute and was awarded the title of a “Woman of Influence” in commercial real estate by Real Estate Forum Magazine and Globe Street. Ms. Mace is a graduate of Mount Holyoke College (B.A.) and the University of California (M.S.). She has also earned The Certified Business Economist™ title (CBE) from the National Association of Business Economists (NABE). Ms. Mace is often cited in the Wall Street Journal, the New York Times, Seniors Housing Business, Seniors Housing News and McKnight’s Senior Living and has a bi-monthly column in the National Real Estate Investor.