Finally, after five years, independent living values appear to have returned to 2014 levels. According to the latest four-quarter period ended June 2019, the average price for independent living properties rose to $257,800 per unit, up 2.4% from the $251,800 per unit in the four quarters ended March 2019 and 8.3% from the $238,100 per unit in calendar year 2018. That level is also 4.5% higher than the previous record-high price of $246,800 per unit observed in 2014, according to the Seniors Housing Acquisition & Investment Report. Back then, many owners of high-quality, well-performing IL communities in high-barrier-to-entry markets saw high per-unit prices in the M&A market and decided to sell their properties, driving values up even further up. Those high-quality sales tempered in 2015 but somewhat rebounded from 2016 to 2018. In that period, as overdevelopment, census and labor issues dragged the assisted living market down, independent living saw healthy occupancy levels, modest new construction activity and limited effects from a tight and pricier labor market. That strength has clearly driven the current pricing peak in independent living.

While prices have risen, the average cap rate has fallen accordingly. From the 8.2% average cap rate recorded in calendar year 2018, IL communities sold at an average 6.65% cap rate in the 12 months ended March 2019 and 6.5% in the most recent four-quarter period. It is true that independent living is simply a less risky investment compared with assisted living. The staffing and care requirements are far less, and a well-run community in a high-income area can generate operating margins above 45% and even 50%. That alone should attract investors for years to come.