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.   

NIC, in conjunction with research partner NORC at the University of Chicago, has completed a four-part research series analyzing the health and wellbeing of senior housing and care residents. The research series paired Medicare claims data with NIC MAP Vision property data to provide a nationally representative survey of the prevalence of various health events and conditions by property type. This provides stakeholders with a better understanding of the health and wellbeing of senior housing and care residents – and how they change following a move to senior housing.

By analyzing the healthcare utilization and ultimate outcomes of senior housing residents and comparing them with their counterparts living in the broader community, this research series highlights the value of residing in a senior housing setting.

The most recently released study compared the health outcomes of older adults living in a senior housing setting with those who live in the broader community. The key takeaway from the research indicates that residents in senior housing have lower rates of inpatient admission from the emergency department for issues related to physical injury, hip fracture, wounds, COPD, dehydration, and UTIs. This finding reinforces the notion that senior housing enables improved access to safe and high-quality care for older adults.

The study also found opportunities to further improve care delivery for senior housing residents. Senior housing residents have higher utilization of the emergency department than their peers living in non-congregate settings. Some of this may be attributed to regulatory requirements and legal precautions when sending residents out for emergency care. While these residents are less likely to be admitted to the hospital, decreasing this emergency department utilization is an opportunity for senior housing operators to explore further.

The ‘Health Outcomes’ study findings supplement prior research that focused on Frailty, Access to Physicians, and Longevity. The key takeaways from the first three studies in this research series find that older adults who reside in senior housing communities:

• Experience improved frailty levels shortly after moving into a senior housing setting
• Receive more care from specialty providers such as podiatrists, psychiatrists, and cardiologists
• Receive more healthcare services delivered directly in their place of residence and
• Live longer and experience a lower mortality rate in the first two years in senior housing

NIC is leveraging the findings from its research showing improvements in health outcomes and longevity measures to raise awareness of the value of senior housing beyond owners, operators, and investors. NIC seeks to raise awareness with CMS, Medicare Advantage payors and payviders, and other holders of the healthcare dollar risk for the residents who live in our communities.

Senior housing operators are often not financially rewarded for the value they provide in reducing healthcare costs to payors. NIC has launched a further study in partnership with NORC to quantify the cost savings and reduction to the total cost of healthcare spending for residents in these senior housing settings. Results of the “Cost Savings” study currently underway will be shared at the 2024 NIC Fall Conference, being held September 23-25, 2024 in Washington D.C.

The purpose behind NIC’s research is to inform and support business strategy and policy that improves older adults’ housing and healthcare. To review details and learn more about each portion of this four-part research series, visit the NIC website here.

NIC’s Strategic Plan includes objectives to ‘expand the tent’ across five key focus areas – Active Adult, AgeTech, Capital for Operations, Middle Market, and Partnering for Health. Focus Area Committees (FACs) were formed to support these efforts. The AgeTech Committee is led by Chair Michael Kurliand, VP Clinical Quality and Integration, MedWand Solutions, Inc. Kurliand shared his thoughts on his role and the work of this important committee. 

NIC: How did you first get involved with NIC as a volunteer? 

Kurliand: I first became involved with NIC as a volunteer after speaking at the Spring conference in San Diego. The engagement and thoughtful dialogue from attendees both inside and outside the sessions was inspiring; I had never seen that much before at any conference ever. The professionals I encountered were some of the best and brightest in their fields. This experience left a strong impression on me, and thankfully, I was soon invited to join NIC’s Spring Conference Program Committee. This role eventually led to my involvement with the AgeTech Focus Area Committee, where I continue to collaborate with innovative leaders in the senior housing industry. 

NIC: As the chair of the AgeTech Focus Area Committee, can you tell us about the composition of the committee?  

Kurliand: The AgeTech Committee is a dynamic assembly of professionals from diverse industries that work in or with senior housing. Our members are outstanding experts, not just in their fields, but also in technology. We have clinicians, Electronic Medical Record and technology vendors, operators, owners, and lenders. This collective expertise ensures a comprehensive set of perspectives, enabling us to drive the dialogue and education around innovation and transformative change in the industry.  

NIC: Why do you think it’s important for NIC to focus on AgeTech? 

Kurliand: Understanding AgeTech is crucial for senior housing as it advances the quality of care and enhances the quality of life for residents and the people that serve them. By integrating the appropriate technologies, organizations can provide more personalized, efficient, and proactive care. AgeTech-friendly solutions, such as telehealth, remote monitoring, and AI-driven analytics, enable better health outcomes, reduce hospital visits, and ensure safety and well-being. Moreover, embracing these innovations helps address staffing challenges, streamline operations, and meet the evolving expectations of seniors and their families. Ultimately, a deep focus on AgeTech is essential for fostering a sustainable, forward-thinking, and compassionate senior housing environment. 

NIC: What does the AgeTech Committee aim to accomplish in the next year? 

Kurliand: The AgeTech Committee aims to recommend compelling, forward-thinking content in the next year. This includes suggestions for engaging conference sessions, practical workshops, and identifying needed research and educational content. By doing so, we’ll advance the industry through thought leadership and knowledge-sharing. Our goals also include fostering collaboration among experts from various sectors, enhancing the integration of appropriate and helpful technologies in senior housing, and ultimately improving the quality of care and life for seniors and the people that support them.  

Expert Insights from Outside Industries 

More older adults are living in senior housing today than ever before, with the number of senior housing communities outnumbering McDonalds restaurants in the U.S. by 20%. And in the next four years, the over-80 population will increase at a rate 16x higher than recent senior housing inventory growth.  

With these and many more compelling data points on the state of the industry, Justin Hutchens, Executive Vice President, Senior Housing at Ventas, and Chair of the 2024 Data & Analytics Conference Program Committee, aptly kicked off an exciting two days in Minneapolis where conference attendees learned and shared the latest data uses and insights that can help move the industry forward. 

“Complexity can get in the way of transparency,” Hutchens noted, sharing that the operational complexities inherent in senior housing have contributed to the lack of transparency and data availability for the sector compared to the multifamily and hospitality sectors. But he believes that can change as the “relatively small” sector (compared to other real estate property types) works together.  

The 2024 NIC Data & Analytics Conference provided an opportunity for both analysts and executives to strategize on how to use data and analytics to drive resident and staff engagement, and ultimately business success. Informative sessions and formal and informal networking opportunities provided the perfect setting for knowledge-sharing.  

AI is the Future, and the Future is Now 

The topic of AI was a thread running through many of the conference sessions. Arick Morton, CEO, NIC MAP Vision, discussed ways AI can dramatically upscale the industry by helping operators make use of their vast amounts of data without having to budget for staffs of data analysts, noting that in the sector “There’s a ton of data. Part of the challenge is leveraging that data.” 

Justin Grammens, Founder & CEO, Recursive Awesome, Lab 651 & Applied AI, discussed the productivity gains that can be realized today just by utilizing ChatGPT, citing use cases for content creation, sales and marketing analyses, employee onboarding, and even help desk support. He offered examples where AI can be used by different stakeholders in senior housing and care: 

• Residents and owners – Predictive healthcare, wearables, and products to counteract depression. 
• Owners and investors – Smart buildings, marketing automation, workflow automation.  
• More: Self-driving cars, augmented reality/virtual reality to combat resident isolation. 

HumanGood CTO, Nick Lindberg, described HumanGood’s use of AI for administrative purposes and the productivity gains they’ve experienced as “a lot of little wins start to add up.”  

If you’re wondering where to begin with adopting AI in your business, Grammens advises businesses to get started with just one thing, “Find the low hanging fruit with minimal risk.” Lindberg suggests encouraging adoption by starting with examples, show people what it can do.  

Learning From Outside Perspectives  

During the eight interactive sessions, experts dug into topics covering the latest research and data-driven insights paving the way for strategic growth. One of the goals of this year’s event was to learn from experts from adjacent and related sectors. Voices from outside of the senior housing and care industry were well represented on session panels, offering perspectives on how GE, Humana, CoStar, Revenue Analytics, United Optum, Walmart, and other companies have used analytics to power their business models and drive customization of the staff and client experience.  

In one executive breakout session, Humana’s Levi Bailey, VP, Enterprise Data Platform & Integration, discussed Humana’s focus on value-based care, with data as a key enabler for measuring outcomes and ultimately managing rising costs in the healthcare system. “The more we can do to detect and prevent things from happening to our members, it has a massive effect on the overall ecosystem,” he explained.  

Easing Technology Adoption 

Another common theme in the conference was the question of how to ease technology adoption in senior housing and care both at the enterprise level, and the community level. Sevy Petras, Founder and CEO, Priority Life Care, LLC, believes the industry is past slow adoption of technology and is “ready to go.” But she thinks state regulations may cause roadblocks. She also noted the time commitment associated with evaluating all product options that operators are presented with, and that any solution must integrate seamlessly with other data platforms. 

Standardized data utilization was mentioned by several panelists, with Arnie Whitman, Partner, SLTC, LLC, expanding on the need for integrated health records that will drive efficiency and value for operators. 

As for easing the process of getting community level buy-in for new technologies and data platforms, Lindberg advised, “Don’t lead with what the technology is. Lead with the solution, the problem you’re trying to solve.”  

Many thanks to the 2024 Data & Analytics Program Committee volunteers for curating such topical and engaging content.  

Mark your calendar for the 2025 NIC Data & Analytics Conference, May 7-8, 2025, in Indianapolis, IN. You won’t want to miss it!