The availability of financing and increasing interest rates are the top concerns among senior housing investors, according to poll results shared in Partner Valuation Advisors’ US Seniors Housing 2023 Investor Survey Report, released Friday. It marks the company’s inaugural edition of the report.
PVA received more than 100 responses from those active within the senior living industry, including developers, lenders, investors and investment sales professionals.
Respondents said that they expect to see capitalization rates increase over the next 12 months. Looking forward, the authors noted, the industry “is well-positioned for growth due to the foundational factors of limited new supply and ongoing strong demand; however, the broader capital markets have become less appealing with the increasing cost of capital.”
Thirty-five percent of the respondents said that they expect capitalization rates to increase more than 25 basis points, Fifty-eight percent of respondents said they expected capitalization rates to increase by 10 to 25 basis points, whereas 35% of respondents said that they expected cap rates to increase more than 25 basis points in the next 12 months and 7% of respondents said that they anticipated that capitalization rates would remain relatively flat.
When it comes to property values, “the consensus of respondents indicated that property values have declined due to the increased cost of capital and increased cap rates,” the authors noted.
Many senior housing properties have mitigated the negative effect to property values by increasing rents by 3% or more.
“Nonetheless, 54% of respondents felt that property values had declined 7.5-12.5% over the past 12 months with an additional 29% of respondents indicating a decline greater than 12.5%,” according to the survey report.
See additional coverage of the survey here.
