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CREFW-Fall2014 10.15.14

A More Granular Look As you can see in the table below, the list of metros with the lowest aggregate vacancies in the country are dominated by markets on both the east and west coasts. From the east coast, Long Island is ranked as the tightest market with an overall vacancy rate of 4.3%. From Connecticut, both Hartford and New Haven rank in the top ten, and not surprisingly, two Florida markets also appear, Jacksonville and Miami. Among west coast markets, San Jose had the lowest vacancy, with just 4.5% of inventory lacking tenants. Oakland and Portland, OR ranked just below that as the third and fourth tightest markets in the nation. San Francisco rounded out the top ten with a vacancy rate of 7.0%. The bottom of the list, a.k.a. the metros with the highest vacancy, are mostly found in the spacious markets of Texas and in the Midwest. Dallas, San Antonio and Houston can all be found in the bottom five with vacancy rates of 12.4%, 11.5% and 11.4%. Two Ohio markets, Akron and Dayton, were among the highest vacancy metros, with three more (Toledo, Columbus and Cleveland) not far outside the bottom ten. Table 1 Top and Bottom Metro Aggregate Vacancy Rates, Second Quarter 2014 Source: Reis CRE Finance World Autumn 2014 32 To take a deeper look at metro performance, we examined recent trends in gross revenue (taking into account vacancy and rent changes) across all of our markets in each of the four senior housing subtypes. Interestingly, a look at the top and bottom performers across subtypes reveals very few similarities. The list of metros is quite varied, with some markets even among the top performers for one subtype while being a bottom performer in another subtype. However, there are a few consistencies. Most notably, San Francisco and Richmond have both been standout performers over the past year in each of the four property subtypes. Over the past year, gross revenue growth in San Francisco ranges from a low of 6.4% for independent living to a high of 8.1% for assisted living. Meanwhile, in Richmond gross revenue growth ranged from 7.2% for independent living to 9.2% for assisted living. On the downside, Hartford, CT was a serial offender, ranking among the ten worst performers in the independent living (+1.9%), assisted living (+0.1%) and skilled nursing (+2.5%) categories. What Does the Future Hold for Senior Housing? Risks and uncertainty remain: Supply remains restrained, but will developers eventually respond with a deluge of new product? Will there be any major technological or medicinal advances in the coming years that will further delay the influx of baby boomers? Will future changes to the nation’s healthcare system and Medicare program cause major disruptions in the senior housing business? Still, favorable demographics, restrained supply, steady income, potential diversification benefits and relatively high yields all contribute to the current growing interest in senior housing. Is it Time to Invest in Senior Housing?


CREFW-Fall2014 10.15.14
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