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Private capital represents increasing share of senior housing investment: report

Institutional investors are making up a smaller share of senior housing buyers than in years past, according to JLL’s Valuation Advisory group’s sixth annual Seniors Housing Investor Survey and Outlook.

Their share of the purchases went from 28% in 2019 to 16% through the third quarter of 2022, the report notes

“The top 10 seniors housing owners make up more than one-third of all ownership, and top public [real estate investment trusts] Welltower and Ventas were the top purchasers in the last 24 months, but private capital has taken an increasing share, with more developers and owners seeking to enter the seniors housing space,” the authors wrote.

Overall, however, senior housing investors are optimistic as they look to the year ahead, according to the report.

Pricing uncertainty limited capital market activity in the second half of 2022 and is expected to continue at least through the first half of this year. Despite economic uncertainties, 44% of the investors surveyed indicated that they planned to increase their exposure to senior housing in 2023, although another 44% indicated that they would make no change to their current investments.

“While there are certainly challenges in the current capital markets, the underlying fundamentals of the seniors housing sector remain strong,” JLL Managing Director Brian Chandler, MAI, CRE, co-lead for the seniors housing practice, valuation advisory, said in a statement. “We’ve seen rising occupancy rates, rising rents and a very muted construction pipeline, which will drive demand through 2023 and beyond.”

Takeaways from the report:

  • Occupancy recovery will be fueled by healthy demand and delayed inventory growth
  • Private capital will assume an increasing share of investment;
  • Rent in seniors housing communities has been steadily increasing, with annual rent growth picking up across 2022;
  • The low historical growth of senior housing in some Sunbelt markets will present opportunity.

The 80-and-older population is expected to grow by more than 50% over the next decade, noted JLL Managing Director Bryan Lockard, MRICS, co-lead for the firm’s seniors housing practice, valuation advisory. Comparatively, he said, the overall population is expected to grow by just 4.7% during the same period.

“This underscores the enormous wave of pending demand for additional seniors housing and nursing care facilities, providing ample opportunity for developers, owners and investors in the sector long-term,” Lockard said.

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