More investors are looking to expand their portfolio on senior housing and care real estate, according to the most recent U.S. Seniors Housing & Care Investor Surveyby CBRE. The interest is not only among investorsbut also among developer circles as well as brokers and lenders alike. This, despite the ongoing forecast of interest rates on the rise.
The Survey
Compared to a year ago, investor interest in expanding senior housing portfolio increased by 13 percentage points in 2017 to 60 percent from just 47 percent a year ago.
Forty-four percent of investors now anticipate a rise in capitalization rates. An increase from just 33 percent a year ago. Of the total investor population, only 4 percent expect a decrease while 52 percent anticipate cap rates to remain as they are in the incoming year.
The biggest portion of the increase was on Class A nursing care which rose by over 24 basis points from the previous year, a surge that experts attribute to the uncertainty surrounding healthcare laws or the brooding concern on the increasing cost of nursing care throughout the years.
Investor preferences
Compared to assisted living properties, independent living property types are seen to be the better investment option, increasing by 9 percentage points from last year. Age-restricted properties are also gaining interest while memory care properties showed a decline in investor choice.
What factor is most likely to impact senior housing in the future? Experts say it’s the current strain in construction activity which does not only affect the care aspect of the housing industry. The anticipated increase in interest rate is also causing concern among investors, with the highest percentage increase of 11 percent from a year ago. Another factor seen to put a strain on senior housing is property-level operation which gained a response percentage of 21 percent.
“The seniors housing investment market is expected to move into a more rational transaction period as capitalization rates slowly increase,”says CBRE Valuation & Advisory Services managing director Zach Bowyer.
“Favorable investment yields, the need-driven component of demand, and the aging population storyline will continue to drive investment into the sector in 2017 and entrench its attractiveness to investors,” adds CBRE’s head of multifamily research Jeanette Rice.
