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Seniors housing benefiting from economy, report says

October 15, 2014
by Lois A. Bowers, Senior Editor
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The seniors housing industry is benefiting from the improved national economy and housing market, according to the latest Seniors Housing Research Report from commercial real estate investment sales, financing, research and advisory services firm Marcus & Millichap.

The improving stock market has bolstered the confidence that seniors and baby boomers have in the economy as well as in their ability to afford assisted living or other seniors housing options when the time comes, the authors say. “Retirees are unlocking equity once trapped in their homes due to the soft housing market and deploying those funds towards entrance-fee [continuing care retirement communities (CCRCs)] or other seniors housing options,” according to a summary of the report.

New construction currently is limited to a few states with favorable regulatory environments but is expected to increase elsewhere as well, the authors say.

Portfolio acquisition by REITs and others continues at a “staggering pace,” according to the report, with the resulting consolidation resulting in economies of scale for large owners and management companies. Sales may be limited after mergers, but state and county moves to managed care may prove lucrative for some operators, they authors note.

Marcus & Millichap’s forecast for various sectors of seniors housing for this year, according to a summary on the company’s website:

  • Independent living: A strong economy will result in further gains in occupancy and rents for operators in the second half. For the whole year, occupancy will see an increase to 91.5 percent, and average rent will increase 3.1 percent to $2,859 per month.
  • Assisted living : As development increases, the pace of occupancy improvement will ease. Nonetheless, occupancy will increase to 91.3 percent, and average rent will increase 3.4 percent to $4,218 per month.
  • Skilled nursing facilities (SNFs): Slowing inventory growth and healthy demand will support a small increase in occupancy during the second half. SNF occupancy will increase to 88.4 percent, and average rent will increase 3.6 percent to $284 per bed per day.
  • CCRCs: Average occupancy will increase to 90.6 percent as older adults sell their homes and relocate to CCRCs. Average rent will increase to $2,910 per month, 1.7 percent higher than a year ago.

The entire report is accessible on the company’s website.