NCREIF publishes the most widely used private real estate investment benchmark in the U.S., the “NPI” (NCREIF Property Index), which tracks investment returns of more than 12,000 properties that are held by institutional investors. Seniors Housing is now included as a standalone sector in the NPI, a long awaited and highly important recognition for the sector that NIC has been striving toward.  

For more than two decades, NIC has participated in NCREIF membership and has appreciated the opportunity to bring NIC’s senior housing expertise to the organization, highlighting the property type’s unique investment characteristics.  

In the first quarter of 2024, NCREIF published its new Expanded NPI, which grew the index from real estate’s traditional “4 Food Groups” (Office, Retail, Industrial, Apartment) to include Seniors Housing. This sector is comprised of four subsectors: Independent Living, Assisted Living, Continuing Care, and Skilled Nursing.  

This expanded index – which now breaks out Seniors Housing from an “Other” subsector outside of the Index into its own standalone sector included in the Index – is important because private equity institutional investors are evaluated based upon their portfolio holdings versus their designated benchmark. As a result, a zero allocation to any category within the benchmark, e.g., Seniors Housing, requires an explanation to clients. Overall, including Seniors Housing in the flagship NCREIF index raises its visibility with investors and makes it more difficult to exclude from investment portfolios, which in turn should help drive capital into senior housing and care.  

When preparing to launch the Expanded NPI, NCREIF inquired whether senior housing should be included in the Residential sector. NIC highlighted the following distinctions for senior housing: 

• Demand factors differ from traditional Residential and result in lower resident turnover, driving market fundamentals and investment returns that are uncorrelated (or at least less correlated) to traditional Residential.  
• Higher level of operations than traditional Residential ranging from Lifestyle Coordinators at Active Adult communities; to dining, laundry, and transportation at independent living properties; to health care, ADL, and memory care services at assisted living and memory care communities. 
• Due to larger operations and dual mandate of housing and care at higher acuity communities, senior housing operates under different regulations. 

Learn more about senior housing investment returns in the most recent quarter and longer term here. 

NBC’s Chuck Todd and former HHS Secretary Mike Leavitt to unpack the upcoming election at the 2024 NIC Fall Conference. 

The first presidential debate of the 2024 election was short on policy but long on theatrics as President Biden and former President Donald Trump squared off on stage in Atlanta.  

Few insights beyond the obvious were provided into how the candidates’ policies might impact senior living. But the debate did showcase the fact that the campaign ahead is likely to be filled with more twists, turns and surprises. 

“The debate lacked policy specifics,” said Ray Braun, president and CEO at the National Investment Center for Seniors Housing & Care (NIC), Annapolis, Maryland. “The industry is watching how these candidates will address the issues that affect our business.”  

The debate comes at a pivotal time for the industry amid congressional hearings, heightened media attention, initiatives to enhance accountability in healthcare and the future role of private capital.  

With a high-stakes election on the line, the 2024 NIC Fall Conference is fittingly being held in Washington, D.C., (September 23-25). Recognized as the senior housing and care industry’s premier event for networking and educational programming, the NIC Fall Conference is known for its high-profile speakers.  

This year, attendees can expect to get an insider’s view of the upcoming election during the keynote opening session on September 23. The session features NBC Chief Political Analyst Chuck Todd and former U.S. Secretary of Health and Human Services, Mike Leavitt.    

The must-see keynote session—just six weeks before the election—will unpack the state of the race, regulatory changes, and the economic impacts and policy shifts that will fundamentally reshape the future of senior living. The speakers will also explore the potential policy outcomes of divided government control versus single-party dominance. 

During the Wednesday presidential debate, the candidates touched briefly on several industry-related issues.    

• Inflation is still too high. Rising expenses and wages are a continuing challenge for senior living owners and operators. Both candidates said they would address inflation.  

• The 2017 tax cuts are set to expire in 2025. The outcome of the election could determine whether the cuts are extended which could impact owners.  

• Immigration reform could ease workforce shortages, though how to deal with immigration was a contentious issue on the debate stage.    

• The topic of regulation was mentioned, along with the future of entitlement programs.  

As the campaign unfolds, industry stakeholders will be watching for more policy signals. The 2024 NIC Fall Conference promises to be a vital forum for attendees to deepen their understanding, stay informed about emerging issues, and engage in meaningful discussions with peers and experts. 

Learn more about the 2024 NIC Fall Conference and register, here. 

The following analysis examines the occupancy distribution among care segments within entrance fee and rental CCRCs in the 99 NIC MAP Primary and Secondary Markets. The analysis also explores the relationship between 1Q 2024 occupancy levels and occupancy growth from 1Q 2022 to 1Q 2024, compared to the same-store asking rent growth from 1Q 2022 to 1Q 2024 – by region. 

Key Takeaways:  

• Most CCRCs maintained relatively high occupancy rates across living segments, with entrance fee CCRCs holding a slight edge over rental communities. 

• The data revealed a pattern in the relationship between rent growth and occupancy levels. Regions with higher occupancy rates reported relatively smaller rent growth. 
• Another pattern emerged in the relationship between rent growth and occupancy growth over the last two years. Regions with stronger occupancy growth generally reported smaller rent growth. 

1Q 2024 Occupancy Distribution by Care Segment – Entrance Fee CCRCs vs. Rental CCRCs 

The exhibit below explores the distribution of occupancy rates across entrance fee and rental CCRC care segments and shows a greater prevalence of entrance fee and rental CCRC care segments within the higher occupancy rate ranges. 

Entrance Fee CCRCs. The data showed that 90% of entrance fee independent living segments reported an occupancy rate above 80% in the first quarter of 2024. This represents the largest share across all care segments and payment types. Assisted living follows closely at 87%, while memory care stands at 83%, and nursing care stands at 73%. 

Rental CCRCs. 81% of assisted living segments reported an occupancy rate above 80%, followed by independent living and memory care segments both at 77%, and nursing care segments at 76%.

1Q 2024 Occupancy vs. Rent Growth from 1Q 2022 to 1Q 2024 – Rental CCRCs

The scatterplot plot below revealed a pattern in the relationship between occupancy levels and asking rent growth (on average) across U.S. regions. Notably, increases in asking rent appear to be associated with occupancy rates. 

Regions with higher occupancy rates, such as the Northeast and Mid-Atlantic, reported relatively smaller rent growth. In contrast, regions like the Southeast showed the highest rent growth but the lowest occupancy rate.  

The Pacific region appears to be an outlier, distinguished by both high rent growth and high occupancy rates, standing out from the general trend observed in other regions. 

From 1Q 2022 to 1Q 2024 – Occupancy Growth vs. Rent Growth – Rental CCRCs 

The relationship between asking rent growth and occupancy growth (on average) from 1Q 2022 to 1Q 2024 provides further insights. Notably, the graphical depiction of occupancies and rent growth patterns show a potential association between the two metrics. 

Regions with more robust occupancy growth over the last two years, such as the Southwest, reported relatively lower asking rent growth. Conversely, regions like the Southeast showed the highest rent growth but the smallest occupancy growth. The data also revealed regional clusters in rent growth vs. occupancy growth. 

The identified patterns were consistent across entrance fee CCRCs. While many factors, such as local market supply and demand dynamics, availability of options for residents with varying income demographics, the specific property and its amenities, and the perceived value of the unit in comparison to the competition in the area, may influence occupancy levels and growth, this analysis showed that asking rent growth is in fact a variable that could influence average occupancy levels overall as well as occupancy growth or improvements.  

NCREIF publishes the most widely used private real estate investment benchmark in the U.S., the “NPI” (NCREIF Property Index), which tracks investment returns of more than 12,000 properties that are held by institutional investors. Seniors Housing is now included as a standalone sector in the NPI, a long awaited and highly important recognition for the sector that NIC has been striving toward.  

For more than two decades, NIC has participated in NCREIF membership and has appreciated the opportunity to bring NIC’s senior housing expertise to the organization, highlighting the property type’s unique investment characteristics.  

In the first quarter of 2024, NCREIF published its new Expanded NPI, which grew the index from real estate’s traditional “4 Food Groups” (Office, Retail, Industrial, Apartment) to include Seniors Housing. This sector is comprised of four subsectors: Independent Living, Assisted Living, Continuing Care, and Skilled Nursing.  

This expanded index – which now breaks out Seniors Housing from an “Other” subsector outside of the Index into its own standalone sector included in the Index – is important because private equity institutional investors are evaluated based upon their portfolio holdings versus their designated benchmark. As a result, a zero allocation to any category within the benchmark, e.g., Seniors Housing, requires an explanation to clients. Overall, including Seniors Housing in the flagship NCREIF index raises its visibility with investors and makes it more difficult to exclude from investment portfolios, which in turn should help drive capital into senior housing and care.  

When preparing to launch the Expanded NPI, NCREIF inquired whether senior housing should be included in the Residential sector. NIC highlighted the following distinctions for senior housing: 

• Demand factors differ from traditional Residential and result in lower resident turnover, driving market fundamentals and investment returns that are uncorrelated (or at least less correlated) to traditional Residential.  
• Higher level of operations than traditional Residential ranging from Lifestyle Coordinators at Active Adult communities; to dining, laundry, and transportation at independent living properties; to health care, ADL, and memory care services at assisted living and memory care communities. 
• Due to larger operations and dual mandate of housing and care at higher acuity communities, senior housing operates under different regulations. 

Learn more about senior housing investment returns in the most recent quarter and longer term below.

First Quarter 2024 Senior Housing Investment Returns

Senior housing posted a relatively flat total return of -0.10% in the first quarter of 2024, up from a total return of -2.44% in the prior quarter, outperforming the broader NPI, which posted a total return of -0.82% in the first quarter. Positive income returns for senior housing were offset by negative appreciation, driving relatively flat total returns for the quarter. 

By senior housing property subtype, independent living outperformed on a total return basis (+0.38%) in the first quarter but was offset by assisted living (-0.45%). Over the longer term, independent living has outperformed assisted living on a total return basis over the one-, three-, and five-year periods. This outperformance may be driven by higher margins typically generated in lower acuity settings such as independent living, which require less staffing or FTEs. 

The senior housing income return in the first quarter was 1.13%, in line with the residential sector (1.07%) and the overall NPI (1.16%). The senior housing appreciation (capital/valuation) return was -1.22% in the first quarter but better than the residential sector (-1.99%) and the overall NPI (-2.08%). The appreciation return is the change in value net of any capital expenditure incurred during the quarter. During the quarter, economic and capital market conditions drove flat or negative appreciation returns in all sectors. 

On a longer-term basis, the 7.01% annualized ten-year return for senior housing was the strongest of the main property types, except for industrial (13.79%) and self storage (12.58%), outperforming the NPI ten-year annualized total return of 6.51%. Income returns for senior housing (4.95%) surpassed the NPI (4.57%), as did the appreciation return (2.00% vs 1.87%).  

The performance measurements cited above for senior housing reflect the returns of 217 senior housing properties valued at $11.20 billion in the first quarter. This was the highest property count in the NCREIF time series for senior housing, although market value was down from a high of $11.47 billion in mid-2023 due to negative appreciation returns. Overall, the number of senior housing properties tracked within the NPI has grown significantly from the 134 properties in the first quarter of 2020 that were valued at $6.3 billion. The additional properties may be influencing the overall performance returns of the index.  

First quarter 2024 senior housing market fundamentals showed a continued recovery in occupancy rates in the 31 Primary Markets, according to NIC MAP® Data powered by NIC MAP Vision, as demand for senior housing units continued to outpace new supply. As a result, the occupancy rate for senior housing stood at 85.6%, up 0.5 percentage points from the prior quarter and only 1.5 percentage points below its pre-pandemic level of 87.1% in the first quarter of 2020. Overall, the relatively steady improvement in market fundamentals coupled with a record number of occupied units illustrates that today more older adults than ever before are residents in senior housing properties. 

Source: NCREIF 

Source: First Quarter 2024 NCREIF Performance Report, NIC Analytics 

The Federal Reserve concluded its June 2024 FOMC meeting with a decision to maintain the federal funds rate at its current range of 5.25% to 5.50%, marking the sixth consecutive time the rate has been held steady since July 2023. This decision reflects the Fed’s cautious approach to managing inflation, which remains a central concern despite recent signs of easing. 

Economic and Inflationary Environment 

The latest Consumer Price Index (CPI) report showed a year-over-year increase of 3.3% in May, slightly down from April’s 3.4%. Core inflation, which excludes volatile food and energy prices, also saw a modest decline, rising 0.2% month-over-month compared to 0.3% in April.  

The labor market remains resilient overall, with U.S. employers adding 272,000 jobs in May, significantly surpassing the forecasted 185,000. Healthcare was the largest category of labor growth during the month, with the addition of 68,300 positions. Nationally, the unemployment rate ticked up to 4%, the highest since January 2022, ending a 27-month streak of sub-4% unemployment. This increase, coupled with a decline in job openings to their lowest level since February 2021, suggests a cooling labor market. While there has been some improvement in recruitment and retention efforts within the senior housing and care space, elevated wage expenses remain a pressure point on margins.  

Fed Chair Jerome Powell emphasized that while there has been “modest further progress” toward the 2% inflation target, the central bank is not yet convinced that economic conditions warrant a reduction in borrowing costs. The Fed now projects only one rate cut in 2024, a significant revision from earlier expectations of multiple cuts. 

Impact on the Senior Housing & Care Sector 

The senior housing and care sector, historically known for its recession-resilient nature, continues to navigate the higher interest rate environment. Until borrowing rates begin to come down and there is greater access to capital, new development activity will continue to be stifled. The upside to this trend is that with limited new competition coming onto the market and record levels of demand, occupancies will continue to rise.  

The transaction environment will also remain in limbo as acquisition opportunities will be largely limited to those who can tap into cash buyers or alternative investors, such as private credit. The debt markets continue to be challenged due to a combination of more stringent regulatory requirements for loans and also various lenders working through a degree of distress within their portfolios.  

Despite the challenges posed by rising interest rates, the sector benefits from strong demographic tailwinds, with an aging population driving heightened demand across the next two decades. The Federal Reserve’s cautious stance on interest rates, coupled with a resilient labor market and easing inflation, presents a mixed but manageable outlook for the senior housing sector. Most professionals, both capital providers and operators, remain bullish on senior housing and expect that in the coming months, with anticipated reductions in borrowing rates, the sector will be able to move forward to meet the needs of the growing older adult population.