The senior housing sector posted a total return of 0.11% in the first quarter, up from a decline of 0.88% total return in the previous quarter, according to a National Investment Center for Seniors Housing & Care blog post.
“Positive income returns for senior housing were partially offset by negative appreciation, which reduced the overall investment return,” NIC Senior Principal Caroline Clapp wrote. “In comparison, negative appreciation for the NPI [NCREIF Property Index] more than offset positive income returns, driving negative total returns for the quarter.” NCREIF is the National Council of Real Estate Investment Fiduciaries.
The senior living income return in the first quarter was 0.88%. According to Clapp, this rate was higher than in the hotel (0.82%) and industrial (0.83%) sectors but still below the overall NPI (1.01%) The senior housing appreciation (capital/valuation) return was negative for the third consecutive quarter, Clapp noted. At –0.76%, however, senior housing appreciation increased from the previous quarter’s return of –1.75%. By comparison, the apartment sector’s appreciation return was –3.05%.
“Many investors have reduced their appreciation expectations for senior housing as the sector has not yet recovered to its pre-pandemic occupancy rate. The appreciation return is the change in value net of any capital expenditure incurred during the quarter,” the financial analyst said.
On a longer-term basis, she noted, the 10-year return for senior living (9.33%) was among the strongest of the main property types and outperformed the NPI 10-year annualized total return of 8.34%.
The performance measurements cited for senior living reflect the returns of 205 senior living properties valued at $11.15 billion in the first quarter. The property count and market value were the highest in the NCREIF time series for senior living, NIC noted.
“It is notable that the number of properties tracked by this index has grown significantly since the beginning of the pandemic, up from 134 properties in the first quarter of 2020 that were valued at $6.3 billion. The additional properties may be influencing the overall performance returns of the index,” Clapp said.
