Senior housing posted a positive total return of 0.71% in the third quarter of 2024, slightly trailing the broader Expanded NCREIF Property Index (Expanded NPI), which posted a total return of 0.83%. Positive income returns for senior housing (+1.15%) were partially offset by negative appreciation (-0.44%), but still resulted in overall positive returns for the quarter. For the Expanded NPI, the third quarter of 2024 was the first quarter of positive total returns in nearly two years. On a year-to-date basis, senior housing returned 1.53%, outperforming the Expanded NPI by nearly 190 basis points.
By senior housing property subtype, both independent living (+1.14%) and assisted living (+0.33%) posted positive total returns in the third quarter. Year-to-date, independent living returned 2.80% while assisted living returned 0.43%. Over the longer term, independent living 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 and labor expenses than higher acuity settings such as assisted living.
The senior housing income return in the third quarter was 1.15%, in line with the residential sector (+1.11%) and the overall Expanded NPI (+1.20%). The senior housing appreciation (capital/valuation) return was -0.44% in the third quarter, trailing the residential sector (0.00%) and the overall Expanded NPI (-0.37%). The appreciation return is the change in value net of any capital expenditures incurred during the quarter. During the third quarter, the office sector (-2.37%) was the only other property type to record negative appreciation.
On a longer-term basis, over the 10-, 15-, and 20-year periods, senior housing was the strongest property type except for industrial and self-storage, outperforming the Expanded NPI on an annualized basis by 33, 39, and 312 basis points, respectively. Since the beginning of NCREIF’s senior housing historical time series starting in the second quarter of 2003, income yield drove roughly 60% of senior housing total returns, while price appreciation contributed roughly 40%.
The performance measurements cited above reflect the returns of 217 senior housing properties valued at $11.50 billion in the third quarter. Overall, the number of senior housing properties tracked within the Expanded NPI grew significantly from the 56 properties initially tracked beginning in the third quarter of 2003.
Third quarter 2024 senior housing market fundamentals showed a continued increase in occupancy rates in the 31 Primary Markets for the thirteenth consecutive quarter, 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 86.5%, up 0.7 percentage points from the prior quarter.
By property type, there was a 0.5 percentage point increase in the independent living occupancy rate and a 0.9 percentage point increase in the assisted living occupancy rate, and the gap between the two occupancy rates continued to narrow. Overall, market fundamentals are positive and have shown little volatility, posting steady gains over the past three-plus years.
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