It’s no secret that seniors housing is in high demand, with the independent and assisted living subsets the most desirable. But there are also currently major supply issues in the sector, as some markets are beginning to see a lot of new product and, as a result, stagnating occupancy rates. In the fourth quarter of 2017, the national occupancy rate—based on aggregated data from 31 markets—averaged 88.8 percent, down 70 basis points year-over-year, according to the National Investment Center for Seniors Housing & Care (NIC).
By and large, the hot markets for seniors housing development are pretty well-known, says Jeff Binder, managing director with Senior Living Investment Brokerage Inc. “We’re seeing a few basic trends that really aren’t too surprising … more of a longing for familiarity,” Binder says.
Many industry insiders may be quick to say that seniors housing is overdeveloped in most markets, but that is an issue in many asset classes, particularly in places with lower barriers to entry—for example, Dallas, Houston, Atlanta, San Antonio and Denver, says Aron Will, vice chairman of debt and structured finance, seniors housing, at real estate services firm CBRE. “Those are the markets where supply-demand is at an imbalance,” Will says. Still, in seniors housing, there are opportunities to be found. “But they’re not run of the mill,” he notes.
Generally, demand appears to be strongest for class-A product, Will says, while some types of assets, such as memory care, have been overbuilt. “The key to the deal is to build what the market wants and not what you want to build,” says David Rothschild, executive managing director with the senior living group at real estate services firm Cushman & Wakefield.
NREI spoke with several seniors housing and financial experts to learn some of their picks for the top regions around the country for seniors housing development. “People get old everywhere today,” Rothschild notes. “The demographics are pretty overwhelming.”