by Jim Knapp 

Knapp Group Founder/CEO


2019 was a banner year for real estate investors, including investors in the senior housing market.  With the unprecedented market fundamentals still at work, investors are just as optimistic about 2020 and remain active in the seniors housing sector due to the following:

  • Unprecedented strong market fundamentals
  • Current growth cycle length setting all time historical record. 
  • Rarefied low interest rate territory, with Ten-Year Treasury closing last week at 1.84%. 
  • Cap rates near record lows.  
  • Responsible development/construction pipeline, with a little upward supply pressure in the seniors housing sector.
  • Tremendous amount of equity flowing.  
  • Tremendous amount of debt flowing.  
  • Lack of investment alternatives with possible stock market correction.
  • Concern over changes to Capital Gains Tax Laws with ensuing election.

This is an optimistic scenario, and as always, market dynamics vary greatly from state to state, urban to rural, etc.  What we are also hearing in senior housing and long-term care circles, is the attention to a physical plant and care model that remains functional and addresses resident needs and desires well into the future.

Durability, adaptability and creativity are all being seriously considered as we have moved into a time where a fair amount of new product has entered the market.

Any change, whether it is a supply matter or a reimbursement/payor source change, presents renewed pressure to address these new variables, and owners are again pressed to think and adapt to these changes.  

One of the factors we are currently seeing, is that the older product has become significantly older in the past few years.  This is directly a consequence of newer buildings being constructed.  Although residents prefer to stay close to their known home and relatives, a newer, nicer product that delivers similar services, even if there is a nominal increase in price, will cause a senior resident to move a little further than initially desired.

Owners of older buildings will need to weigh any revenue misses that may be due to lower than market rates and/or occupancy issues against the overall cost to upgrade a dated physical plant when considering current and/or future exit or hold strategies.