Senior Housing Pros Worry About Higher Interest Rates, Overbuilding Potential

Click on chart to enlarge.

By Dees Stribling, Contributing Editor

Los Angeles—Capital One has released a survey of senior housing professionals that finds that 41 percent of them expect new development to offer the greatest investment opportunities in the coming year, followed by repositioning of older properties (26 percent). However, when asked about industry concerns for the next 12 months, more than one-third (35 percent) identified potential overbuilding as the top concern.

Nearly one-fifth (19 percent) of the respondents saw the potential impact of higher interest rates as their top industry concern, while 20 percent cited the continued influx of new capital. Fewer expressed worries about state-specific rate and operating environments (10 percent) or the lack of affordable senior housing (10 percent).

Also, most of those surveyed expect the pace of mergers and acquisitions activity in the sector to increase in the next 12 months. Sixty percent believe activity will increase, while 29 percent expect it to stay flat.

“Interest in the development of senior housing assets continues to grow,” Imran Javaid, managing director, healthcare real estate at Capital One, noted. “In this market, it is critical to conduct in-depth due diligence and submarket analysis which could make or break potential developments.”

Capital One conducted the survey at the IMN Real Estate Private Equity Forum on Senior Housing in Los Angeles in mid-September. According to the financial firm, which provides lending to the senior housing industry, respondents included financing professionals, senior housing operators, capital providers, attorneys and other industry professionals. The percentages are based on 100 responses.