Texas Seniors Housing still a sound investment amid COVID-19

1. Research &
Forecast Report
TEXAS | SENIORS HOUSING
Mid-Year 2020
Texas Seniors Housing still a sound investment
amid COVID-19
Lisa Bridges Director of Market Research | Houston
Commentary by Elena Bakina, PhD, CCIM
During the first half of 2020, the Seniors Housing and Care
industry has experienced devastating effects from the COVID-19
pandemic. The mortality rate among people older than 65 has
been much higher than younger generations and has forced states
to close visitations at the communities temporarily. The hardest
affected are skilled nursing facilities (SNFs) versus Seniors
Housing Communities, but they are expected to recover quickly due
to demand. However, not all Seniors Housing Communities and
SNFs were affected equally. In fact, many were not affected by
COVID-19 at all. Operators have had to deal with isolation, safety,
staffing, increased operating expenses and many other issues
caused by the pandemic.
Loneliness, or lack of socialization, is one of the prime reasons
people are moving into Seniors Housing Communities. During the
pandemic, this same issue has risen in the communities as well.
Technology plays a significant role in helping senior residents to
not feel isolated. Communities need faster internet with access to
WiFi in every room as standard amenity. Many communities are
reporting that their internet usage increased by 20-25% during
the pandemic. A growing number of residents are now using
video calling, as well as participating in virtual events, and plan to
continue after the pandemic. All extra steps taken by the operators
made seniors feel safe and cared for, preventing increased move
outs.
Increases in operating costs started long before the pandemic
and will continue after it due to the rise of staffing costs, added
expenses for safety and technology. Labor shortages as the result
of the pandemic will go away, but the challenge of hiring qualified
staff will continue to be one of the major issues for the operators.
Despite all these challenges, the industry fundamentals in the U.S.
and Texas remain positive in the long term. Prior recessions have
shown that, because of its needs-based nature, seniors housing
is better equipped than other sectors to handle economic turmoil.
Although the demographic wave of baby boomers is still at least
eight years away, it is coming. As a result, there is a lot of capital
that continues to flow into the sector.
Summary Statistics
Texas Seniors Housing (AL & IL)
Mid-Year
2019
Year-End
2019
Mid-Year
2020
Stabilized Occupancy 84.6% 85.3% 81.4%
All Occupancy 84.0% 83.1% 80.4%
Net Absorption (units) 1,133 1,634 -1,354
Inventory Growth (units) 1,025 874 1,538
Under Construction (units) 6,351 6,993 6,030
Average Monthly
Rent
Texas Seniors Housing (AL & IL)
Mid-Year
2019
Year-End
2019
Mid-Year
2020
Texas $3,690 $3,751 $3,843
Austin $4,461 $4,488 $4,457
Dallas $3,527 $3,562 $3,597
Houston $3,733 $3,822 $3,870
San Antonio 8$3,421 $3,443 $3,443
Share or view online at colliers.com/houston
Market Indicators
Majority IL & AL
Annual Change
Majority IL & AL
Biannual Change
STABILIZED OCCUPANCY
ALL OCCUPANCY
ABSORPTION
INVENTORY GROWTH
UNDER CONSTRUCTION
AVERAGE MONTHLY RENT

2. 22 Texas Research & Forecast Report | Mid-Year 2020 | Seniors Housing & Care | Colliers International2
Demographics Overview
The U.S. Census reports that seniors represent 10%
of Texas’ population and that 25% of them are living
alone. Approximately 25% of seniors 60 and older
received food stamps in the last year. Further, the
census reports that about 10,000 baby boomers
turn 65 every day and that trend will continue over
the next 15 years, increasing the need for seniors
housing.
2019 U.S. Census data shows that seven of the
nation’s fifteen fastest growing cities are located in
Texas and the state is the third fastest-growing state
in the country in terms of percentage gain of housing
units (11.3%) and first in terms of the largest numeric
increase (1.1 million).
The oldest baby boomers are in their mid-seventies
now and this category of seniors help drive today’s
IL development boom. In the past, the 75+ population
has been entering IL communities in large numbers,
but that’s not the case anymore. Seniors are staying
active longer, and industry players are now running
feasibility analyses on the 80+ population. It’s difficult
to predict when we will see a large number of Baby
Boomers start renting IL and AL communities.
Advances in healthcare and technology may push this
process beyond 2025.
Supply and Demand
The National Investment Center for Seniors Housing
and Care (NIC) reported a decrease in the number
of units absorbed on a net basis in the primary
U.S. markets during the first half of 2020. Annual
absorption was -0.2%, 310 basis points lower than in
Q1 2020 and up 300 basis points from a year ago.
NIC also reported a decrease in the number of units
absorbed in Texas during the first half of 2020,
-1,605 units; however, on a biannual basis there were
283 seniors housing units absorbed. The highest
demand on an annual basis was in the Houston
metro where 285 units were absorbed, followed by
Dallas (145 units). In contrast, both Austin and San
Antonio recorded negative net absorption over the
year of 30 and 320 units, respectively.
In Houston, inventory grew by 574 units and in Dallas
by 155 units. Austin and San Antonio both recorded
negative growth in the first half of 2020, shrinking by
-114 units by -36 units, respectively.
Major metros in Texas reported seniors housing
occupancy rates decreased during the first half of
2020. All of the major markets recorded a decrease
in occupancy between Q4 2019 and Q2 2020.
76.0%
78.0%
80.0%
82.0%
84.0%
86.0%
88.0%
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
Texas Major Metros - Senior Housing (Majority AL & IL)
Absorption Inventory Growth Stabilized Occupancy Occupancy
64.0%
66.0%
68.0%
70.0%
72.0%
74.0%
76.0%
-3,500
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
500
Texas Major Metros - Majority NC
Absorption Inventory Growth Stabilized Occupancy Occupancy
Supply and Demand Trends
Market
No. of
Properties
No. of
Units
Stabilized
Occupancy Absorption
Inventory
Growth
Units Under
Construction
Avg. Monthly
Rent
ALL MARKETS 494 60,944 69.7% -2,864 34 446 $7,129
AUSTIN 52 6,363 74.5% -307 -114 0 $7,350
DALLAS 217 27,307 67.1% -1,358 -47 322 $7,137
HOUSTON 138 17,199 67.4% -724 179 124 $7,442
SAN ANTONIO 87 10,075 69.7% -475 16 0 $6,588
Mid-Year 2020 Nursing Care Statistical Summary
Market
No. of
Properties
No. of
Units
Stabilized
Occupancy Absorption
Inventory
Growth
Units Under
Construction
Avg. Monthly
Rent
ALL MARKETS 643 74,018 81.4% -1354 1,538 6,030 $3,843
AUSTIN 87 9,684 80.7% -129 408 1,079 $4,457
DALLAS 302 33,873 84.4% -569 592 2,216 $3,597
HOUSTON 175 20,886 78.5% -363 574 2,349 $3,870
SAN ANTONIO 79 9,575 81.8% -293 -36 386 $3,448
Mid-Year 2020 Senior Housing Market Statistical Summary - Includes IL and AL Majority
Seniors Housing Statistical Summary

3. 3 Houston Research & Forecast Report | Mid-Year 2020 | Seniors Housing & Care | Colliers International33
Rent Trends
Seniors Housings annual rent growth rate continued to increase
in 2020 in all Texas metros, growing 1.3% over the year. IL and
AL Majority average monthly rent rose 0.6% in Austin, 1.6% in
Dallas, 1.4% in Houston and 1.0% in San Antonio between Q2
2019 and Q2 2020. The Texas average monthly rental rate for
seniors housing is $3,843.
Nursing care trends are not as healthy as seniors housing trends.
Inventory growth for Texas fell by -0.2% on an annual basis.
Annual absorption declined by -6.9% and the occupancy rate
declined over the year by 490 basis points from 73.6% to 68.6%.
At the end of the second quarter of 2020, the Texas nursing care
average asking monthly rental rate of $7,129 was 5.4% higher
than the average rental rate in the second quarter of 2019.
Investment Activity
The 2020 Emerging Trends in Real Estate report by Price
Waterhouse Cooper (PwC) continues to rank Seniors Housing
among top subsectors for investment and development. Private
equity returns for Seniors Housing properties continues to
outpace those of other real estate sectors except for industrial.
For the past seven years, Seniors Housing has been ranked
number one among all types of Apartment Investments. This
year’s report ranked it second after moderate/workforce
apartments.
The average cap rate for Seniors Housing properties in Texas has
decreased to 5.84% at the end of Q2 2020, marginally below the
national average of 5.9%. The average cap rate for SNFs in the
U.S. saw a sharp decline from its highest point of 12.2% in Q4
2018 and reached a historical low 8.6% in Q2 2020.
Despite market uncertainty, the limited supply of new acquisitions
and historically low-interest rates fuel buyers’ competition and,
consequently, push cap rates down. On the other hand, many
buyers have a difficult time securing financing. Lenders are
looking for buyers to have strong financials and more equity
upfront.
Texas Seniors Housing Buyer Composition
Sales Activity - (SH and NC)
Source: Real Capital Analytics Mid-Year 2020
NO. OF PROPERTIES: 22
TOTAL SALES VOLUME: 360.3M
AVERAGE $ PER UNIT: $136,276
AVERAGE CAP RATE: 5.84%
Texas Seniors Housing Sales Volume
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
U.S. Texas
Texas Seniors Housing Price Per Unit
0
500,000,000
1,000,000,000
1,500,000,000
2,000,000,000
2,500,000,000
3,000,000,000
Rolling 4-Quarter Volume Quarterly Volume
`
8.2%
39.8%
25.7%
24.6%
35.8%
1.0%
62.9%
25.2% 35.9%
29.5%
23.1%
18.2%
26.7% 32.3%
25.7%
44.9%
38.7%
80.8%
1.0% 2.7%
12.5%
1.1% 1.0% 2.4%
2015 2016 2017 2018 2019 2020 YTD
Cross-Border Institutional REIT/Listed Private User/Other

4. 4 North American Research & Forecast Report | 2014 | Office Market Outlook | Colliers International
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responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
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Construction Costs
Senior living construction costs have been on the rise in the U.S., including Texas, as a result of labor shortages and the rising prices
of building materials. Developers have seen hard costs increase anywhere between 7-10% annually. According to The Weitz Company’s
national construction data, mid-level assisted living projects development costs range from $194 to $249 per square foot, while mid-level
independent living projects range from $168 to $198 per square foot. In Texas, construction costs are still lower than the national average.
The highest construction costs among Texas major metros are in Houston where mid-level assisted living projects range from $168 to
$268 per square foot, while mid-level independent living projects range from $146 to $221 per square foot.
2020
(Per Gross Square Foot) Low High Low High Low High Low High Low High Low High Low High Low High
Independent Living $140 $165 $159 $213 $143 $169 $162 $218 $146 $221 $165 $221 $140 $165 $158 $212
Cottages $112 $131 $154 $192 $114 $134 $158 $196 $116 $200 $161 $200 $111 $130 $154 $191
Assisted Living $162 $208 $218 $258 $166 $213 $223 $264 $168 $268 $227 $268 $161 $207 $217 $257
Skilled Nursing $186 $218 $236 $301 $190 $223 $242 $308 $194 $313 $246 $313 $185 $217 $235 $300
IL Commons $228 $289 $299 $367 $233 $295 $306 $375 $237 $381 $311 $381 $227 $288 $297 $365
Under Buildling Parking $80 $109 $110 $140 $82 $111 $113 $143 $83 $146 $115 $146 $80 $108 $110 $140
Sitework
Source: The Weitz Company
High-LevelHigh-Level Mid-Level High-Level Mid-Level
Austin Dallas
Excluded Excluded
Senior Living Construction Costs
Excluded Excluded Excluded Excluded Excluded Excluded
Houston San Antonio
Mid-Level High-Level Mid-Level
Year-End Senior Housing Under Construction
(The list below is a selection from different markets and is not a complete list of all properties currently under construction.)
PROPERTY NAME MARKET PROPERTY TYPE IL UNITS AL UNITS NC BEDS OPERATOR
ANTICIPATED
OPEN DATE
Greyrock Seniors at Circle C Ranch Austin Freestanding 152 0 0 Greyrock Sniors LP January 2021
Grand Living at Georgetown Austin Combined 100 80 0 Ryan Companies June 2021
Ariel Pointe Senior Living Dallas Combined 120 85 0 Civitas Senior Living August 2021
Wilshire by Abby Senior Living Dallas Combined 135 90 120 Abby Develoopment July 2021
Vineyard Pearland Houston Combined 130 69 0 Valeo Senior, LLC September 2021
Grand Living at Riverstone Houston Freestanding 100 80 0 Ryan Companies October 2021
The Blake at new Braunfels San Antonio Combined 0 112 0 Blake Managment Group,
LifeCare Properties LLC
December 2020
The Brooks of Cibolo San Antonio Combined 156 78 0 Civitas Senior Living August 2020
Under Construction
According to NIC MAP, our Seniors Housing data source, there were 4,605 Majority IL units under construction in Texas primary markets
in Q2 2020, followed by 1,425 Majority AL and 446 Majority NC units. Dallas and Houston continued to have high volumes of the Seniors
Housing construction. Houston had 2,473 units under construction in Q2 2020, the third-highest in the U.S. Dallas’s construction volume
(2,138 units) is fifth in the country. Senior population growth and an abundance of debt capital spur these new developments.
FOR MORE INFORMATION
Lisa Bridges CPRC
Director of Market Research | Houston
+1 713 830 2125
lisa.bridges@colliers.com
CONTRIBUTOR
Elena Bakina PhD, CCIM
Senior Vice President | Houston
+1 713 830 4008
elena.bakina@colliers.com

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