IRR: Seniors Housing is “One of the Strongest Asset Classes” in CRE

Source: National Investment Center for Seniors Housing & Care (NIC) Source: National Investment Center for Seniors Housing & Care (NIC)

Due to strong demographic shifts and increasing demand, seniors housing is “one of the strongest asset classes over the past 10 years, and this should continue for the foreseeable future,” according to the 2018 edition of Viewpoint, an annual commercial real estate trends report released by Integra Realty Resources (IRR).

The report notes that the 65-and-older population is forecast to grow at an annual rate 3.28 percent over the next five years, which will continue to fuel demand in the sector.

Although the sector has delivered 45,000 new units during the last 12 months depressing occupancy rates, absorption has remained strong, according to the National Investment Center for Seniors Housing & Care (NIC). As new construction slows and new units are absorbed, rent and occupancy rates should rise, IRR predicts.

“There does not appear to be a risk of market-wide overbuilding,” states the report.

As a result of the desirability of the sector, capitalization rates on seniors housing transactions have been on a consistent downward trend since 2010, reaching record lows in 2017. This “reflects the continued acceptance by investors and strong long-range market fundamentals,” according to the report.

With all these strong trends, the seniors housing sector should be able to overcome existing headwinds, the report concludes.

“Aging trends will continue to increase the demand for seniors housing in the foreseeable future. IRR expects 2018 to be another strong year, as the market continues to absorb newly delivered units.”

Integra Realty Resources is a commercial real estate valuation, counseling and advisory services firm. To view the full report, click here

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