Marcus & Millichap: 2012’s Second Half Report Suggests Favorable Investment Climate for Seniors Housing

Marcus & Millichap, the nation’s largest real estate investment firm, released its “Second Half 2012” seniors housing research report with key market highlights by level of care. Though the investment climate is anticipated to be favorable, the report notes that Medicaid cuts could have a sizeable impact on senior living operations, with implications of the Affordable Care Act expected to challenge already tight states’ budgets.

The report cites statistics from the National Investment Center for the Senior Housing & Care Industry’s NIC MAP data to show increased occupancy across independent living, assisted living and continuing care retirement community properties.  Only in nursing is occupancy declining.  For nursing home operators anticipating an exit from the market, the report identifies the pressures on Medicaid mentioned above as a likely impact to the cap rates sellers will realize, as properties with a heavy Medicaid census will need to trade at higher yields due to the potential risk of state budget uncertainties.

The report provides inventory change statistics from NIC MAP by level of care with independent living, assisted living and continuing care retirement communities all showing increased inventory.  Though CCRCs had 2600 units under construction in the second quarter, the report notes that this is a 15 percent decline from same period last year.  The report also suggests that the seven percent increase in national median home price over the last 12 months is a sign for optimism for entrance-fee CCRC owners.

With occupancy expected to strengthen across all levels of care (except nursing) the report notes that the investment market will remain strong for seniors housing properties over the next several quarters “assuming no major economic headwinds rise.”

The report is available with a subscription at the Marcus & Millichap website.

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