The senior living sector posted the highest return of any property type measured by the National Council of Real Estate Investment Fiduciaries in the third quarter, for the third consecutive quarter.
“The senior housing sector is benefiting from strong demand fundamentals with the aging demographic along with record low supply growth. The continued gains in occupancy levels are contributing to improved net operating income,” National Investment Center for Seniors Housing & Care Head of Research and Analytics Lisa McCracken told the McKnight’s Business Daily. “These market fundamentals do not necessarily look the same across other forms of commercial real estate.”
The sector had a positive total return of 2.88% in the third quarter, an increase from 2.08% in the second quarter and 1.87% in the first quarter.
Senior living in the third quarter outperformed the broader expanded NCREIF property index, or NPI, by 1.66 basis points, with the index posting a total return of 1.22%. According to NCREIF, all sectors evaluated had positive returns in the third quarter.
Following senior living, the hotel sector posted a 2.12% return for the quarter, and self-storage came in at 1.68%. Office returns improved slightly to 0.90% compared with 0.78% in the second quarter.
Retail returns dropped from 1.94% to 1.31% quarter over quarter, and residential property returns increased from 1.37% to 1.44% in the third quarter.
The number of senior living properties tracked within the NPI has grown to 213, compared with the 56 properties initially tracked in 2003.
“By property type, occupancy rates for independent living have made slightly higher gains in recent quarters than assisted living, which is a reversal of trends in 2022 and 2023,” Caroline Clapp, senior principal at NIC, wrote in a blog post in August.
NCREIF will hold a Nov. 18 webinar at 2 pm ET to discuss the NPI in greater detail as well as other trends based on the NCREIF data. Those interested in attending can register here.
