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Are seniors housing executives bracing for a bubble, or do they see continued opportunity? The answer may be both, but the majority of owners and operators are not entering slowdown mode quite yet.

At the 2018 National Investment Center for Seniors Housing & Care (NIC) conference, KeyBank Real Estate Capital asked owners and operators of seniors housing facilities for their views on the current market, as well as their opinions on opportunities and concerns for the future. As we’ve found in recent years, senior care businesses are continuing to plan for increased deal volume. In 2018, however, there’s a slight shadow beginning to creep into the general tone of optimism. Rising interest rates and concerns about adequately staffing their holdings are beginning to worry more seniors housing investors than in years past.


  • Seniors housing executives express tempered optimism about the year ahead.
  • Most seniors housing owners increased deal volume over the next three years.
  • Staffing retention and labor costs are an internal issue worrying seniors housing owners and operators.
  • Rising interest rates and competition are key obstacles for the seniors housing sector.

Optimism Levels Leveling Off – But Fewer Overtly Negative

In our 2017 survey, the NIC respondents were overwhelmingly optimistic when asked about their general level of optimism about the industry over the next 12 months. This year, however, this group of NIC attendees was more measured. Looking at the numbers in 2018, 28 percent of respondents stated they are very optimistic, 28 percent are somewhat optimistic, 32 percent are neither optimistic nor pessimistic, and 12 percent are somewhat pessimistic. Notably, not a single respondent viewed the market in the very pessimistic category.

By contrast in 2017, 38 percent of respondents stated that they were very optimistic and another 47 were somewhat optimistic. Only 4 percent were neither optimistic nor pessimistic, but more respondents were somewhat or very pessimistic, 9 percent and 2 percent respectively.

No Slowdown in Deal Volume

Regardless of their tempered optimism levels, this crop of respondents is actively seeking deals. A whopping 80 percent expect deal volume to increase over the next three years, with 36 percent stating it will increase 11-20 percent and 44 percent expecting a 5-10 percent increase.

When asked what the greatest opportunities for business growth over the next 12 months were, nearly half chose property acquisition, while another quarter picked new development, and 20 percent said expansion/ renovation and redevelopment.

This shows a slight shift toward growing portfolios through acquisition from last year’s mix, when 41 percent of respondents said property acquisition (nearly 10 percent less than this year’s group). Additionally last year 28 percent saw the most opportunity in new development, and 11 percent said expansion/renovation and redevelopment.

Rising Interest Rates Cast a Long Shadow for Owners

Seniors housing owners are in active growth mode, but various forces are creating causes of concern. When asked what keeps them up at night, one-third of respondents mentioned staffing or labor concerns, including cost and retention. Compared to last year, when most respondents named oversupply and competition as the cause of their sleepless nights, only 12 percent cited oversupply in 2018. Paired with the responses about new development plans, this suggests some owners and investors see potential to add seniors housing units in their region.

When asked, “What’s the biggest challenge or obstacle facing your organization in the next 12 months?” more than half of those surveyed pointed to a macroeconomic concern: rising interest rates. Competition and controlling expenses round out the list of top worries, each selected by 32 percent.

Bubble Watch 2018

Most respondents – 40 percent – answered “No,” when asked, “Do you believe the seniors housing sector is in a bubble?” But, overall they did express some wariness about the market cycle. Another 28 percent answered, “No, but we’re heading in that direction.” And one in five said that the sector is in a bubble. When asked the same question about the overall commercial real estate market, 28 percent answered “No,” and 32 percent said, “No, but we’re heading in that direction.”

In 2017, half of the respondents said, “No, we’re not in a bubble,” while 20 percent thought, “No, but we’re heading in that direction.” Of the remainder, 22 percent said “Yes” and 8 percent stated we’re in the beginning stages.

Some cautiousness at this point in the cycle is generally considered a good sign because prudent deal-making and responsible lending can prevent a dramatic bubble burst. Even more good news for seniors housing is that demographic trends point to continued demand and increased occupancy rates as the majority of baby boomers have yet to make the move to senior care facilities.

Whatever your perspective, Key can help

The KeyBank Healthcare Finance team delivers keen market insights and ideas for the property financing needs of REITs, hospitals and seniors housing owners, operators and investors. As one of the nation’s leading lenders in the seniors housing sector, KeyBank Real Estate Capital offers an integrated approach backed by a national platform, whether you’re seeking acquisitions, beginning a new development cycle, or positioning your portfolio to withstand a downtown.

To learn more, contact:

Matthew Ruark, head of commercial and healthcare production, at 913-371-4237 or and Kevin Murray, head of healthcare finance, at 770-510-2168 or