Seniors Housing Sector Begins to Overcome COVID-19 Challenges, CBRE Survey Finds

DALLAS — While seniors housing will continue to be impacted over the near term as a result of the COVID-19 pandemic, investors believe the sector has turned the corner from 2020’s significant challenges, according to the CBRE U.S. Seniors Housing & Care Investor Survey.

Investors responding to the survey indicate that tempered investment growth is likely in the short term, with a full recovery to take longer. In the long term, respondents are encouraged by an aging population and a greater understanding of the threats posed by the pandemic.

Seniors housing investment sales activity rose by 19.2 percent in third-quarter 2020 compared to the previous quarter, according to Dallas-based CBRE.

“In the early stages of the pandemic, the availability of capital slowed to a near standstill,” says James Graber, national practice leader of seniors housing and healthcare for CBRE’s Valuation & Advisory Services. “But in recent months, both debt and equity have started to flow into the seniors housing sector again, particularly for buyers and borrowers with pre-existing relationships and proven track records.”

The vast majority of survey respondents (88 percent) expect seniors housing rents to hold firm or rise modestly over the next 12 months. More than two-thirds (70 percent) expect occupancy levels to increase over the next year. These responses reflect guarded optimism going forward.

The outlook for seniors housing capitalization rates over the next 12 months has shifted, with the portion of respondents expecting an increase in cap rates rising to 36 percent, up from 13 percent in the prior survey in February. Over half (53 percent) of respondents expect no change in cap rates in the near term.

“While there can be a focus on changes in cap rates as a result of the ongoing pandemic, underwriting property fundamentals, such as elevated pandemic-related operating expenses and census projections, are having the most significant impact on net operating income expectations,” says Graber.

To view the full survey, click here.