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2018 brings positive outlook for senior living real estate investments

January 24, 2018 Article 1 min read
Dana Wollschlager Plante Moran Living Forward

In a recent national survey, senior housing is considered the best prospect for investment and development.

Happy older couple

Out of all residential property types, senior housing is the best prospect for investment and development in 2018 according to research from the Urban Land Institute (ULI). The senior living and care industry continues to draw the attention of both institutional and private investors.

Why senior living is a good investment

Here are six high-level takeaways from the ULI’s report, Emerging Trends in Real Estate:

  • The top three residential asset classes for both development prospects and investment prospects were senior housing, single family-moderate/workforce properties, and multifamily condominiums. Senior housing ranked the number one in both categories.
  • Across all property types, only fulfillment and warehouse were ranked better investment and development opportunities than senior housing.
  • Although supply has been increasing steadily, the report describes the country’s annualized completion rate of 22,000 units as “relatively modest.”
  • As of Q2 2017, investors participated in more than $14 billion of transactions, with more large institutional investors are supplanting larger public REITS as buyers.
  • With the average price per unit remaining near record highs and low cap rates, senior housing investments are favorable for sellers.
  • With this positive momentum, investors should keep an eye potential oversupply and labor shortages in this space.

Factors driving senior living investment and development 

Many factors are fueling these trends. ULI explains the growing momentum for senior housing as a “spectrum of opportunity” for the real estate industry as the “tremendous intergenerational diversity” of the baby boomers affects the need for housing and services across the country.

The ULI reports sites National Investment Center for Seniors Housing & Care (NIC) to explain the factors fueling investment and development, including:

  • A growing demographic driving demand
  • “Compelling” returns
  • Increased transaction volume and liquidity
  • Improved transparency and availability of data
  • Partnership opportunities with post-acute health care providers
  • Better understanding of the benefits of senior living as a housing option

Are you considering a senior living development or investment? If you are, it’s important to think through your strategy. Plante Moran can help. Our two real estate groups offer services related to senior living development and real estate investment.

Learn more about Plante Moran Living Forward’s development consulting >>

Learn more about Plante Moran Realpoint Investment Advisors’ investment services >>

Contact us today to learn how we can help.

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