Before the coronavirus pandemic took over the U.S. economy, the seniors housing and care market was as a roll, according to data released Monday from Norwalk, CT-based Irving Levin Associates. The average price per unit in assisted living increased to a record $248,400 in 2019, pushing it 12% higher than the previous high of $221,250 per unit in 2017. Skilled nursing bed prices reached $93,000 per bed last year — just the second time bed price values have reached that high.
Among the overall senior living communities (independent and assisted living), the average price hit $244,200 per unit in 2019, a 20% increase compared with the average in 2018. A high number of expensive assisted living sales reportedly drove the market, with more properties selling for more than $350,000 per unit than ever recorded, Irving Levin said.
The average senior living cap rate in 2019 fell to a record low of 7.4%, or 60 basis points lower than 2018’s average of 8%. This further explains the increase in average price and was a result of both lower capital costs and higher-quality properties that sold. Separating out the assisted living and independent living markets, both sectors reported drops in their average cap rates, with the assisted living market falling 80 basis points to an average of 7.6% and the independent living market dropping by 50 basis points to average 6.7%. The average for assisted living matches the previous record-low in 2017, but the independent living average cap rate was 30 basis points lower than the previous low recorded in 2015 and 2017 of 7.0%.
“Operational headwinds like labor costs and stagnant occupancy, both made worse by overdevelopment in many markets, did not seem to dampen investor interest in these new, high-quality communities catering to higher-income populations,” said Ben Swett, editor of the 2020 Senior Care Acquisition Report. “Those communities are better able to offset an increase in operating costs with a corresponding rent increase.”