Assisted living communities experienced occupancy levels of
89.4 percent, the best showing since late 2007, according to the National Investment Center’s top economist.
Additionally, third quarter 2014 results for transaction
volumes, return performance and demand “were impressive for seniors housing,
with new records set on many scores,” writes NIC Chief Economist Beth Burnham
Mace. The senior housing transaction market reached a new high in Q3, with
nearly $7 billion worth of deals closed, up more than 30 percent from the
previous high during Q3 2011.
She expects the year to end on a “high note,” as the fourth
quarter is traditionally strong and two large REIT transactions representing
nearly $6 billion are expected to wrap up. However, Mace Burnham cautions that
the record volumes and competitive landscape raise the risk of pushing up
property pricing and lowering investment returns. She added that the industry
faces pressures with the strong likelihood of rising interest rates within the
next six months to a year, rising expense loads due to higher minimum wage
levels in some states, and rising electricity prices especially for those in
She also notes that Houston is a market to watch, with
intense development – there were 2,130 senior housing rooms under development
as of Q3, or 14.2 percent of its inventory, second only to San Antonio with
16.1 percent and compared to primary markets with 3.4 percent. Burnham Mace
expects Houston to be able to absorb this growth, but is keeping a close eye on
it. “It would take Houston roughly three years to fully absorb the scheduled
new supply. With its strong economy and face pace of job creation and
significant in-migration of new residents, however, Houston will be a very
interested market to watch.”
“Quality care and value will be the real differentiators
that separate the outperformers from the rest of the pack in an increasingly
competitive landscape,” she wrote.
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