Senior living posted a positive total return of 0.91% in the second quarter, led by independent and assisted living, according to the National Investment Center for Seniors Housing & Care.
In a blog post, NIC Senior Principal Caroline Clapp said that senior living — independent living and assisted living — outperformed the NCREIF Property Index, or Expanded NPI — quarterly total returns for private commercial real estate properties — which posted a negative total return of –0.22% in the second quarter. Year to date, senior living has had a positive 0.81% return, outperforming the Expanded NPI by almost 200 basis points.
Both independent living (1.37%) and assisted living (0.51%) posted positive total returns in the quarter, she said. Over the longer term, independent living has outperformed assisted living, driven by higher margins generated in the lower-needs setting, which requires less staffing and labor expense than assisted living.
On a longer-term basis, the 6.63% annualized 10-year total return for senior living was outperformed only by industrial (13.45%) and self-storage (12.09%), and itself outperformed the Expanded NPI (6.17%), Clapp said
The senior living income return in the second quarter (1.29%) was in line with the residential sector (1.11%) and the overall Expanded NPI (1.18%). Income returns for senior living over the 10-year annualized period was 4.91%, surpassing the Expanded NPI (4.55%), she said.
Senior living appreciation return (–0.38%) also performed better than the residential sector (-0.96%) and the overall Expanded NPI (–1.40%), Clapp said. During the second quarter, economic and capital market conditions drove negative appreciation returns in all sectors except the hotel sector, which saw a positive return of 0.18%.
The performance measurements for senior living were based on the returns of 215 senior living properties — up for the original 56 properties tracked in the third quarter of 2003 — valued at $11.39 billion in the second quarter, according to the blog post.
Occupancy recovering in 31 markets
Senior living demand continued to outpace new supply, with second-quarter market fundamentals showing continued occupancy rates recovery in the 31 primary markets that NIC follows, Clapp said. Senior living occupancy stood at 85.9% overall in the second quarter, up half a percentage point from the first quarter, she added.
Independent living overtook assisted living in occupancy rate increases in the second quarter, posting a 0.7 percentage point increase compared with assisted living’s 0.5 percentage point increase, Clapp noted.
“Overall, the relatively steady improvement in market fundamentals, coupled with a record number of occupied units, illustrates that today more older adults than ever before are residents in senior housing properties,” she wrote.
