Investors are still cautiously optimistic about the seniors housing market even after the sector experienced a slight dip in transaction volume in 2018. JLL’s Spring 2019 Seniors Housing Survey, which included more than 1,000 potential respondents who specialize in the seniors housing and care space, points to generally positive sentiment around the market and notes that while transaction volume totaled just over $13 billion in 2018, the total number of transactions was up 41 percent year-over-year. 

“There simply weren’t as many large deals with big price tags in 2018 in comparison to the preceding few years,” said Brian Chandler, Managing Director of JLL Valuation & Advisory Services. “Though there were fewer large transactions, single assets and small portfolios have remained liquid.”

Continuum of care facilities without skilled nursing remain the most favored product. Eighty-eight percent of survey respondents said these assets were “very” or extremely” desirable, a 2 percent jump over the survey's winter edition.

Freestanding nursing facilities remained the least favorite asset type, though only 41 percent of survey respondents said they were “not at all desirable,” a 15 percent improvement over the survey’s winter addition.

Product comes online at record clip 

Overall, occupancy for seniors housing held relatively steady, ending the year at 88 percent, about 2.2 percent below its recent peak of 90.2 percent.

“There is still strong demand for high-quality, stabilized product,” said Lisa Strope, JLL Director of Research. “With a record number of units coming online at the end of last year, we believe we have probably hit the trough of occupancy and expect that new product to be fully absorbed in the next few years.”

This demand is evident in continued cap rate compression, notes Strope. For instance, respondents said their expectations for cap rates on the highest quality Free Standing Independent Living and Free Standing Assisted Living assets were 20 basis points and 10 basis points less respectively than in the winter survey.

“Cap rate compression is continuing for the highest quality assets, and the spread between Class A and Class C cap rates is widening, signifying that demand is really present for the cream of the crop in seniors housing,” said Chandler.

Investors remain bullish on value appreciation

Looking forward, 57.1 percent of survey respondents said they believe there will be a modest increase in value for seniors-only apartments, while 40.4 percent said they see Independent Living, Assisted Living and Memory Care facilities making modest gains. Of all categories surveyed, only Skilled Nursing had a majority of respondents (51.6 percent) say they expected to see a modest decrease in value.

 “Despite some headwinds that have emerged, there remains a positive outlook, especially for investors with high quality product,” said Chandler. “Demographics continue to be favorable as the Baby Boomers turn 65 at a rapid clip, and investors are recognizing that now is the time to gain a foothold in the sector.”

JLL delivers multifamily investors a full range of solutions through one diverse, integrated platform. The division employs over 200 professionals who provide comprehensive investment sales and disposition services with access to thousands of domestic and foreign investors. JLL is also one of the nation’s largest affordable and conventional multifamily and seniors housing lenders with comprehensive loan underwriting, asset management and loan servicing capabilities. Agency/GSE lending and loan servicing are performed by Jones Lang LaSalle Multifamily, LLC, a wholly owned indirect subsidiary of Jones Lang LaSalle Incorporated. Loans made or arranged in California are done so in accordance with a California Financing Law license. 

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2018 alone, the firm’s 2,400 Capital Markets specialists completed nearly $180 billion in investment sale and debt and equity transactions globally.

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