Senior Housing Investor Survey Shows Guarded Optimism

Most industry insiders expect that occupancy will increase over the next 12 months, according to a new report by CBRE.
Chart courtesy of CBRE

Senior housing investors are cautiously optimistic about the sector’s prospects, with a new survey by CBRE registering expectations that rents will hold firm and occupancy levels will rise over the next year. 

According to the brokerage’s latest survey of senior housing investors, developers, lenders and brokers across the country, 70 percent of respondents anticipate that occupancy will rise over the next 12 months, compared to 53 percent in the prior survey, which closed at the end of February.


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The finding suggests that investor sentiment is brightening as the industry deals with pandemic-induced disruption. Senior housing occupancy declined 2.6 percentage points to a record low of 82.1 percent in the third quarter, the National Investment Center for Seniors Housing & Care (NIC) reported in October.

Investors are also modestly upbeat on the rental outlook across all property types, with a large majority saying they are underwriting rental trends to either remain flat or increase 1 to 3 percent over the next 12 months. Specifically, this response ranged from 78.3 percent of investors in assisted living and memory care, to 85.9 percent in active adult and independent living.

Investors shift gears

The health crisis and its associated challenges hit the investment market hard. Overall investment in senior housing and care assets totaled $6.5 billion year-to-date through the third quarter, down 50.2 percent from the prior year, according to Real Capital Analytics data cited by CBRE. For Q2 and Q3 only, total investment plunged 67.2 percent from the previous year.

The survey also identified possible signs of investor flight to quality. The average price per unit for senior housing acquisitions rose 3.5 percent year-over-year in Q3 to $116,200, which CBRE attributes to a focus on higher-quality assets rather than asset appreciation.

Moreover, spreads between Class A and Class B assets widened during the pandemic, while the delta between Class B and Class rates decreased. Class A cap rates increased by 27 basis points overall from the H1 survey, though this figure was just 15 basis points when active adult assets are excluded. Class B and Class C properties, on the other hand, saw growth of 28 and 22 basis points, respectively.

Assisted living remained at the top of investors’ wish lists, with nearly one-third of respondents identifying the property type as the biggest opportunity for investment. Independent living came in second place at 22 percent, while active adult fell to third place at 15 percent.