Investors reveal their top targets in seniors housing
JLL investor sentiment survey shows investors covet independent and assisted living facilities
CHICAGO, Feb. 22, 2018 — A wave of baby boomers is now heading into retirement with more than 10,000 turning 65 each day. Strong demographics and continued rent growth bode well for seniors housing, and according to JLL's Year-End 2017 Seniors Housing Investor Survey, investors are bullish on the sector's potential for growth over the next few decades.
"The oldest of the baby boomers are now 72, and while relatively few are ready for seniors housing how, the coming wave of boomers is already having an impact on the seniors housing sector," said Charles Bissell, Managing Director, JLL Valuation & Advisory Services. "New investors are seeking to gain footholds in the sector now, and developers are beginning to think ahead about how new product will need to evolve to appeal to the boomers."
Part of that evolution is a shift toward facilities with both independent and assisted living on one campus, which 86 percent of respondents ranked as very or extremely desirable. The survey included more than 250 potential respondents including investors, operators, developers and lenders in the seniors housing and healthcare space according to Lisa Strope, Director of Research for JLL.
"Increasingly, smart capital is moving toward facilities offering a continuum of care, and many are seeking urban infill locations where there is some protection from competition," said Bissell. "Continuum of care facilities allow residents to age in place more seamlessly and this is a benefit to both the consumer and the operator."
Though the outlook for seniors housing is bright, there are a few risks investors are taking into consideration. According to the survey, risks on investors' radar are overbuilding, rising labor costs, and attracting and retaining qualified talent for their facilities.
The Bureau of Labor Statistics expects healthcare occupations to grow 18 percent from 2016 and 2026, well above the average for all occupations. The aging population is a primary driver of those healthcare needs, and owners and operators are acutely aware of the challenges in recruiting talent.
Inventory outpaced absorption last year, but construction looks to be plateauing. Urban product has accounted for nearly a third of added inventory since 2014 and in most urban markets fundamentals remain strong. Overbuilding issues are most prevalent in outlying suburban areas, where product is relatively easy to develop quickly.
Looking forward, investors expect to see the recent shift from single-level-of-care facilities to continuum-of-care facilities to continue. Nearly 70 percent of respondents to the survey said this trend is "definitely here to stay."
"Having all of your care under one roof, typically in an infill location, is extremely appealing to millennials who are now making choices about where to put their parents," said Allison Holland, Managing Director, JLL Capital Markets. "Development of this kind of product will continue, and we expect this to become a much more common product type as the cycle progresses."
JLL offers a wide range of services to the seniors housing sector including valuation services, market and feasibility studies, property tax services, capital market services, and investment sales. 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.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2017, JLL had revenue of $7.9 billion and fee revenue of $6.7 billion; managed 4.6 billion square feet, or 423 million square meters; and completed investment sales, acquisitions and finance transactions of approximately $170 billion. At the end of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of 82,000. As of December 31, 2017, LaSalle had $58.1 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.