Senior Housing Sector Continues Recovery: CBRE

Rental rates and occupancy are on track to increase this year, according to the firm's latest survey.

Biggest Opportunity for Investment. Chart courtesy of CBRE

A CBRE survey has found the senior housing sector likely to witness increases in both rental rates and residencies during 2022. The same survey ascertained that seniors housing residency could spring back to pre-COVID levels within 18 months.

The majority of investors (82 percent) believe pre-pandemic levels will be reached within 18 months, with the swiftest absorption coming in active adult and independent living areas of the sector. In assisted living and memory care areas of the sector, the reabsorption period will extend to 24 months, most (89 percent) investors believe.

Within active adult, independent living and memory care assets, rental rate increases of 1 to 7 percent in 2022 are anticipated by more than 70 percent of investors. Some 42 percent foresee increases of between 3 and 7 percent.

In the skilled nursing and continuing retirement community life plan community subsectors, 68 percent anticipate rental rate growth of 1 to 3 percent in 2022.

Biggest opportunity

“Capitalization rates have compressed to pre-pandemic levels and, after incorporating consideration for ongoing market dynamics, our house view is that capitalization rates are projected to remain mostly stable for the foreseeable future,” James Graber, leader of Seniors Housing and Healthcare for CBRE’s Valuation & Advisory Services, told Multi-Housing News.

Average seniors housing capitalization rate in 2021 dropped by 13 basis points year over year. That rate currently sits below the H1 2020 pre-pandemic average. Almost 50 percent of respondents expect cap rates to remain flat this year, in spite of rising interest rates and inflation.

The greatest opportunity for investment in the seniors housing sector will be within active adult, say 34 percent. The strongest challenges for the sector will be seen within the areas of staffing availability and cost, trailed by inflation and interest rates. Earlier this week, a JLL survey revealed optimism regarding the seniors housing sector.

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