Sehgal Capital Investments and Property Solutions’ Post

The senior living real estate sector in the Midwest is experiencing significant growth, driven by demographic shifts and evolving market dynamics. This report provides an overview of current trends, investment opportunities, and challenges within the region. Market Overview Occupancy Rates: As of Q4 2023, senior living occupancy in primary markets, including key Midwestern cities, rose to 84.4%, just 2.7 percentage points below pre-pandemic levels. This marks the 10th consecutive quarter of occupancy gains, indicating a robust recovery post-pandemic. AFS Law Investment Activity: Assisted living remains a top investment target, with active adult and independent living communities also attracting significant interest. Investors are capitalizing on opportunities to acquire high-quality real estate below replacement cost, anticipating long-term demographic benefits. JLL Regional Trends Construction and Development: The East North Central region, encompassing parts of the Midwest, has seen varied construction activity. Data indicates ongoing development to meet the growing demand for senior housing, though specific figures vary across states. Plante Moran Cap Rates: Average cap rates for senior housing have increased by 16 basis points between October and March, reflecting shifts in investor sentiment and market conditions. Notably, cap rates for non-core market independent living Class A assets rose to 7.2%. CBRE Investment Opportunities Active Adult Communities: These communities are increasingly favored, benefiting from the leading edge of the baby boomer generation. They typically comprise younger, lower-acuity residents, presenting lucrative investment prospects. CBRE Assisted Living Facilities: With rising demand for specialized care, assisted living facilities offer substantial growth potential. Investors are underwriting rental rate increases, with some anticipating growth above 7% in the coming year. CBRE Challenges Regulatory Changes: Proposed staffing requirements and other regulatory adjustments could impact operational costs and profitability within the sector. Staying informed and adaptable is crucial for stakeholders. AFS Law Workforce Shortages: The industry continues to face staffing challenges, which may affect service quality and expansion efforts. Implementing effective recruitment and retention strategies is essential. Conclusion The Midwest senior living real estate market is poised for growth, supported by favorable demographic trends and increasing investor interest. However, navigating regulatory landscapes and addressing workforce issues remain critical to sustaining this momentum.

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