Market Fundamentals and Trends in Seniors Housing Chuck Harry Chief of Research & Analytics, NIC
Argentum Senior Living Executive Conference San Diego Convention Center San Diego, CA Monday, May 14, 2018
Copyright Š2018 National Investment Center for Seniors Housing & Care (NIC). All rights reserved. Data believed to be accurate but not guaranteed; subject to future revision. This report is a part of the NIC MAPŽ Data Service (NIC MAP). Distribution of this report or any part of this report without prior written consent or license by NIC is prohibited. Subject to the NIC Terms of Use. For license information please contact NIC at 410-267-0504.
National Investment Center for Seniors Housing & Care (NIC) NIC is a 501(c)3 organization whose mission is to enable access and choice by providing data, analytics and connections that bring together investors and providers.
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Market Fundamentals and Trends in Seniors Housing ▪ Investors’ Interest in Seniors Housing ▪ Demand Drivers for Seniors Housing ▪ Latest Market Fundamentals in Seniors Housing ▪ Macroeconomic Patterns
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Seniors Housing Occupancy’s Downward Trend Seniors Housing Fundamentals Primary Markets | 1Q06–1Q18
Inventory Growth
Absorption
All Occupancy
Stabilized Occupancy
9,000
94%
8,000
92%
7,000
90%
6,000
88%
5,000
86%
4,000
84%
3,000
82%
2,000
80%
1,000
78%
0
76%
-1,000
74%
-2,000
72% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: NIC MAP® Data Service
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Market Fundamentals and Trends in Seniors Housing ▪ Investors’ Interest in Seniors Housing ▪ Demand Drivers for Seniors Housing ▪ Latest Market Fundamentals in Seniors Housing ▪ Macroeconomic Patterns
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Seniors Housing Investment Returns Are Relatively Strong NCREIF Annualized Total Returns by Property Type Period Ending 3/31/18 18 16 14 12 10 8 6 4 2 0 One Year
Three Years
NPI
Hotel
Source: NCREIF
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Apartment
Industrial
Five Years Office
Retail
Ten Years Seniors Housing
2018 Emerging Trends in Real Estate® from ULI and PwC
• Seniors housing ranks third among 24 commercial/multifamily property types for best investment and development prospects in 2018. • Seniors housing ranks first among 7 residential property types for best investment and development prospects in 2018.
Source: Urban Land Institute (ULI) and PwC; published October 2017 7
2018 Institutional Investors Real Estate Trends from IREI
• Seniors housing ranks fourth among the 15 commercial property types by U.S. investors for attractiveness of new investment in 2018. • Seniors housing ranks second among the 15 commercial property types by foreign investors for attractiveness of new investment in 2018.
Source: Institutional Real Estate, Inc.(IREI) and Kingsley Associates; published May 2018 8
Diverse Buyers Led by Private and Institutional Buyers Closed Transactions Seniors Housing & Care Volume by Buyer Type1 U.S. | 1Q08 – 1Q18
1. Preliminary Data Source: NIC MAP® Data Service, Real Capital Analytics
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Moderate Levels of Property Sales Transactions Continue Seniors Housing & Care Transactions Volume1 U.S. | 1Q08–1Q18
Rolling 4-Qtr
Rolling 4-Qtr
1. Preliminary Data Source: NIC MAPÂŽ Data Service, Real Capital Analytics
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Average Seniors Housing Price Per Unit (PPU) Still High Seniors Housing & Care Transactions Rolling 4-Quarter Price Per Unit1 U.S. | 1Q08–1Q18 Seniors Housing
Nursing Care
1. Preliminary Data Source: NIC MAP® Data Service, Real Capital Analytics
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Market Fundamentals and Trends in Seniors Housing ▪ Investors’ Interest in Seniors Housing
▪ Demand Drivers for Seniors Housing ▪ Latest Market Fundamentals in Seniors Housing ▪ Macroeconomic Patterns
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SNF and AL Provide Lower Cost Alternatives for Post-Acute Care
Post-Acute Care Continuum
Acute Care $2,271/day
$1,512/day
Hospital
Long-Term Care Hospital
$1,456/day
$508/day
Inpatient Skilled Nursing Rehab Facility Property
$145/day
Home w/ Home Health Care
$150/day
Assisted Living
Sources: 1999 - 2015 AHA Annual Survey, Copyright 2016 by Health Forum, LLC; Medicare Payment Advisory Committee (MedPAC) Data Book, June 2016; NIC Skilled Nursing Data Report, June 2017; MedPAC Report to Congress, March 2016; NIC MAP Data Service 2Q2017
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Life Expectancy Has Risen Over Past Century U.S. Life Expectancy in Years At Birth | 1900–2015 90 80 70 60
50 40 30 20 10 0 1900
1940
1950
1960
1970
Source: CDC — National Center for Health Statistics, NIC
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1975
1980
1985
1990
1995
2000
2005
2015
Far Fewer Caregivers to Support Seniors Going Forward Ratio of Caregivers (45-64 year olds) to Those Over 80 Will Shrink from 7:1 Today to 4:1 in 2030 •
Declining Fertility Rates Among Baby Boomer Women
•
Baby Boomers Shift from Being the Caregivers to being the Receivers of Care 7 6 5 4 3 2 1 0 2017
Source: U.S. Census, NIC
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2030
2050
Demographics Will Continue to Get Better U.S. Number of Live Births (1909 to 2013, 000s) 5,000 4,500
Today’s 82-Year Old Resident Was Born in 1935
4,000 3,500 3,000 2,500 2,000 Greatest Generation 55 Million
1,500 1,000
Silent Generation 47 Million
Generation X 55 Million
Baby Boomers 76 Million
Post Millennials 65 Million
Millennials 66 Million
Source: U.S. Census, NIC MAPÂŽ Data Service
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2011
2008
2005
2002
1999
1996
1993
1990
1987
1984
1981
1978
1975
1972
1969
1966
1963
1960
1957
1954
1951
1948
1945
1942
1939
1936
1933
1930
1927
1924
1921
1918
1915
1912
0
1909
500
Current Growth in Younger Old Outstrips Other Older Cohorts Forecasted Growth in 75-Plus Population by Select Cohorts 2017–2040 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
75 - 82 Source: U.S. Census Bureau Projections, 2017
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83 - 87
88-Plus
Market Fundamentals and Trends in Senior Housing ▪ Investors’ Interest in Senior Housing ▪ Demand Drivers for Senior Housing
▪ Latest Market Fundamentals in Senior Housing ▪ Macroeconomic Patterns
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Much of the Seniors Housing Inventory is Older Share of Seniors Housing Properties by Age of Property as of 2Q17 Less than 2 Years 5%
25 Years Plus 32%
2 - 10 Years 17% 10 - 17 Years 16%
17 - 25 Years 30%
Source: NIC MAP® Data Service
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Annual Inventory Growth Outpaces Annual Absorption Annual Inventory Growth Rate and Annual Absorption Primary Markets | 4Q06–1Q18
Independent Living
Annual Inventory Growth Annual Absorption
6% 5% 4% 3% 2% 1% 0% -1%
Assisted Living
2007
2008
2009
Source: NIC MAP® Data Service
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6% 5% 4% 3% 2% 1% 0% -1%
2010
2011
2012
2013
2014
2015
2016
2017
2018
Assisted Living Occupancy Well Below Independent Living Occupancy Primary Markets | 1Q06–1Q18 IL
AL
Srs Hsg
93% 92% 91% 90% 89% 88% 87% 86% 85% 84% 83% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: NIC MAP® Data Service
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Extraordinarily Severe Flu Season Likely Affected Demand
Source: Center for Disease Control (CDC)
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Independent Living Occupancy Projected to Remain Near 90% Majority Independent Living Supply-Demand Forecast Primary Markets | 4Q06 - 1Q19’F
Occupancy Annual Inventory Growth (R) Annual Absorption (R) 6% Forecast 5% 4% 3% 2% 1% 0%
93% 92% 91% 90%
89% 88% 87% 86% 85% 84%
2007
2008
2009
Source: NIC MAP® Data Service
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Occupancy Rate Projected to Slip Further for Assisted Living Majority Assisted Living Supply-Demand Forecast Primary Markets | 4Q06 - 1Q19’F
Occupancy Annual Inventory Growth (R) Annual Absorption (R) 6% Forecast 5% 4% 3% 2% 1% 0%
93% 92% 91% 90%
89% 88% 87% 86% 85% 84%
2007
2008
2009
Source: NIC MAP® Data Service
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2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Seniors Housing Occupancy: 22 Markets Down, 7 Up Y/Y Seniors Housing Occupancy by Metro Market Primary Markets | As of 1Q18
Occupancy Range (4Q05 - 1Q18)
Current Quarter Occupancy Year Ago Occupancy
100%
95%
90%
85%
Source: NIC MAP® Data Service
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SA
HOU
ATL
DAL
LV
KC
CLE
PHO
RIV
CHI
DEN
DET
ORL
MIA
TAM
STL
MAP31
CIN
MIN
DC
PHI
SF
SD
LA
BOS
NY
SEA
PIT
SAC
POR
BAL
75%
SJ
80%
A One-Year Look Back at Supply and Demand Seniors Housing Supply-Demand Primary Markets | 1Q17–1Q18
Source: NIC MAP® Data Service
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Secondary Markets Now Trailing Primary Markets Seniors Housing – All vs. Stabilized Occupancy Primary & Secondary Markets | 4Q05–1Q18
Primary - All Secondary - All Primary - Stabilized Secondary - Stabilized
93% 92% 91%
90% 89% 88% 87% 86% 2006
2007
2008
Source: NIC MAP® Data Service
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2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Where Did Seniors Housing Inventory Growth Occur During the Last Year? Seniors Housing Annual Inventory Growth Primary & Secondary Markets | 1Q17–1Q18
Source: NIC MAP® Data Service
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How Did Seniors Housing Absorption Vary by Market During the Last Year? Seniors Housing Annual Absorption Primary & Secondary Markets | 1Q17–1Q18
Source: NIC MAP® Data Service
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AL Construction Starts Slowing in Secondary Markets Majority AL Construction Starts (Units) Primary & Secondary Markets | 2Q07–1Q18 18000
4-qtr moving sum
Primary Markets
15000 12000 9000 6000 3000 0 18000
Secondary Markets
15000 12000
4-qtr moving sum
9000 6000
3000 0 2008
2009
Source: NIC MAPÂŽ Data Service
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2010
2011
2012
2013
2014
2015
2016
2017
2018
Independent Living Construction Starts Plateauing or Rising? Majority IL Construction Starts (Units) Primary & Secondary Markets | 2Q07–1Q18 18000 Primary Markets
15000
4-qtr moving sum
12000 9000 6000 3000 0 18000 Secondary Markets
15000 12000
4-qtr moving sum
9000 6000
3000 0 2008
2009
Source: NIC MAPÂŽ Data Service
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2010
2011
2012
2013
2014
2015
2016
2017
2018
Annual Same-Store Rent Growth Below Wage Growth Annual Asking Rent Growth / Avg. Hourly Earnings* Primary Markets | 4Q06–1Q18
Assisted Living Employees Asking Rent - Assisted Living
Asking Rent - Independent Living
6% 5% 4%
3% 2% 1% 0% -1% -2% 2007
2008
2009
2010
2011
2012
*Wage data as of 4Q17 Source: NIC MAP® Data Service, U.S. Bureau of Labor Statistics
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2013
2014
2015
2016
2017
2018
Market Fundamentals and Trends in Seniors Housing ▪ Investors’ Interest in Seniors Housing ▪ Demand Drivers for Seniors Housing ▪ Latest Market Fundamentals in Seniors Housing
▪ Macroeconomic Patterns
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1948Q1 1949Q3 1951Q1 1952Q3 1954Q1 1955Q3 1957Q1 1958Q3 1960Q1 1961Q3 1963Q1 1964Q3 1966Q1 1967Q3 1969Q1 1970Q3 1972Q1 1973Q3 1975Q1 1976Q3 1978Q1 1979Q3 1981Q1 1982Q3 1984Q1 1985Q3 1987Q1 1988Q3 1990Q1 1991Q3 1993Q1 1994Q3 1996Q1 1997Q3 1999Q1 2000Q3 2002Q1 2003Q3 2005Q1 2006Q3 2008Q1 2009Q3 2011Q1 2012Q3 2014Q1 2015Q3 2017Q1
Getting Closer to Record Low Jobless Rates…
U.S. Unemployment Rate (%) Q1 1948 – Q1 2018 12.0
10.0
8.0
6.0
4.0
2.0
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Q1 1969: 3.4%
Q2 1953: 2.6%
Source: US Bureau of Labor Statistics, Moody’s Analytics
Q4 2017: 4.1%
Q4 2000: 3.9%
0.0
… Leading to Mounting Wage Pressures? Average Hourly Earnings (Percent Change from Year Earlier) January 2015 – March 2018 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%
0.0% Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov- Jan- Mar15 15 15 15 15 15 16 16 16 16 16 16 17 17 17 17 17 17 18 18
All Sectors Source: Moody’s Analytics, U.S. Department of Labor
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Assisted Living
… 2nd Longest Recovery to Date. Is It Time to Worry? History of Recent U.S. Recessions and Expansions Recessions 1945 1948-1949 1953-1954 1957-1958 1960-1961 1970 1973-1975 1980 1981-1982 1990-1991 2001 2008-2009 Average 1945-2009 Source: NBER
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Months of Duration 8 11 10 8 10 11 16 6 16 8 8
Expansions 1945-1948 1949-1953 1954-1957 1958-1960 1961-1969 1970-1973 1975-1980 1980-1981 1982-1990 1991-2001 2001-2007
Months of Duration 37 45 39 24 106 36 58 12 92 120 73
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2009-TBD
107 to date*
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58 *As of May 2018
Rising Interest Rates; Flattening Yield Curve Yield Curve for U.S. Treasuries Q4 2015, Q4 2016, Q4 2017 and April 24, 2018 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 3-Month
6-Month
1-Year
2015Q4
2-Year
3-Year
2016Q4
5-Year
2017Q4
7-Year
24-Apr-18
Maturity Length of U.S. Treasuries Source: Moody’s Analytics, NIC
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10-Year
20-Year
30-Year
Recent Recessions Have Been Preceded by Fed Tightening Fed Funds Rate and Recessions 1962Q1– 2017Q1 20 18 16 14 12 10 8 6 4 2
Recession
Source: NBER, Federal Reserve, Moody’s Analytics
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Fed Funds Rate
2016Q1
2014Q1
2012Q1
2010Q1
2008Q1
2006Q1
2004Q1
2002Q1
2000Q1
1998Q1
1996Q1
1994Q1
1992Q1
1990Q1
1988Q1
1986Q1
1984Q1
1982Q1
1980Q1
1978Q1
1976Q1
1974Q1
1972Q1
1970Q1
1968Q1
1966Q1
1964Q1
1962Q1
0
-2
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1962Q1 1963Q1 1964Q1 1965Q1 1966Q1 1967Q1 1968Q1 1969Q1 1970Q1 1971Q1 1972Q1 1973Q1 1974Q1 1975Q1 1976Q1 1977Q1 1978Q1 1979Q1 1980Q1 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1
Yield Curve Inversions Lead Recessions Yield Curve Differential Between 10-Year Treasury Yield and 3-month Treasury 1962Q1– 2016Q4
4
3
2
1
0
-1
Inversions
Recession
Source: NBER, Federal Reserve, Moody’s Analytics
Yield Curve Differential
NIC Advancing Transparency on Seniors Housing & Care
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•
Tracks and reports on seniors housing and care data across more than 14,000 properties within 140 U.S. metropolitan markets.
•
12+ years of quarterly time series data for the 31 Primary Markets.
Chuck Harry | Chief of Research & Analytics National Investment Center for Seniors Housing & Care (NIC) charry@nic.org
www.nic.org | 410-267-0504
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