Last year, amid the turbulence of the overall U.S. commercial real estate industry and increasing volume declines, many investors increased their activity in some alternative property sectors, including seniors living, according to an analysis released Tuesday by real estate and investment management firm JLL.
In fact, alternative sectors such as seniors living, self-storage, life sciences, manufactured housing communities, medical office and data center assets collectively were responsible for more than $47.9 billion in transaction volume in 2020, bringing these nontraditional real estate assets more into focus as investors sought yield. Of this, senior living and nursing care transactions accounted for $9.9 billion.
“Prior to the pandemic, investors were already expanding their focus and allocation to alternative assets, with the alternatives sectors’ share of overall transaction volume rising to 9% between 2017 and 2019 versus 6% from 2005 to 2007,” said Matthew Lawton, JLL Capital Markets co-head of investment sales advisory group. “Underpinned by secular and cyclical drivers, many of the alternative asset classes are expected to generate among the highest risk-adjusted returns on a long-term basis of all property types.”
Although some of this demand is accelerated due to the pandemic, evidence exists that it is more than a passing phase, Lawton noted. The senior living market, which was relatively healthy before COVID-19, was one of the property sectors most affected by the pandemic, the firm noted. Yet as more people are vaccinated, occupancy levels that dipped in 2020 should increase.
“The seniors housing sector is a significant and rapidly growing segment of the commercial real estate industry, and JLL has dedicated substantial resources towards it,” Charles Bissell, managing director of JLL Capital Markets told McKnight’s Business Daily. “The first wave of baby boomers will turn 75 this year, and the number of persons aged 75-plus will double over the next 25 years. This trend will lead to outsized growth in demand for seniors housing.”
Bissell added that although the past year has been challenging for owners and operators, the firm is “more convinced than ever of the long-term viability of the sector.”
“This growth, coupled with the loosening of the labor market, signals seniors housing is an investment with solid long-term fundamentals and the ability to deliver strong returns for decades to come,” the analysis authors wrote.