The assisted living sector fell back to earth in 2018 and dragged the rest of the seniors housing sector with it, according to the soon-to-be-published Seniors Housing Acquisition & Investment Report. Following three successive years of steady increases and a record-high price per unit in 2017 of $221,250, assisted living properties sold on average for just $186,400 per unit in 2018, a 15.8% decline. What could have happened in only a year to cause such a fall? Partially, it was because the share of communities with either 100% or some component of memory care units (which are usually valued higher for their higher rents and more need-based residents) fell from 70% of all communities to 63%. Another reason was the worsening headwinds facing the industry, like labor, census and development, which limit the amount of capital a buyer is willing to risk in a property, particularly an older one that can’t compete as well with the brand-new property down the road.

Finally, an abundance of capital and capital providers facilitated a record-number of transactions announced in 2018, leading more buyers that want to take advantage of a dip in prices to acquire more average- to low-quality assisted living communities than ever before. The growth of that market meant that the high-end properties made less of an impact on the average price per unit. Communities valued above $360,000 per unit made up just 6% of properties sold in 2018, versus 13% in 2017. By comparison, the low to middle market, properties valued between $50,000 per unit and $150,000 per unit, rose in proportion from 35% of sales in 2017 to 45% in 2018 and brought down the median price per unit to $151,500 (from $215,800 in 2017). That made the difference, year over year.