Seniors Housing Annual Total Returns Continue to Outpace Other Commercial Real Estate
Returns Strong. Third-quarter investment return data for the NCREIF-reported seniors housing properties equaled 2.73%, composed of a 1.38% capital return and a 1.36% income return. The annual total return through the first quarter of 2017 was 12.72%, overshadowing the NCREIF Property Index (NPI) result of 6.89% and the apartment result of 6.22%. However, industrial total returns slightly outpaced seniors housing at 12.80%. Despite the relatively strong showing, the total annual return for seniors housing has been trending down since mid-2014 when it peaked at 20.37%. This pattern can also be seen in the broader index and reflects a slowdown in the appreciation component of the index.
On a 10-year basis, total returns for seniors housing exceeded both the NPI and apartments by more than 400 basis points. The difference with hotel was even larger at 656 basis points (10.40% versus 3.84%), while the difference with retail was the smallest of the other five main property types at 257 basis points (10.40% versus 7.83%). On a one-year basis, the widest differential was between hotel and seniors housing at 810 basis points.
These performance measurements reflect the returns of 102 seniors housing stabilized properties, valued at $4.9 billion in the first quarter. This is the first quarter that the property count of the NCREIF universe of seniors housing exceeded 100 properties.