Headshot of Steve Blazejewski
Steve Blazejewski, PGIM Real Estate

Every aspect of the senior housing sector has been affected by the COVID-19 pandemic, leaving many executives and investors with a less favorable short-term view of the industry than in past years. That’s according to results from the 2020 National Real Estate Investor/National Investment Center for Seniors Housing & Care investor sentiment survey.

Nearly 170 respondents from the senior housing sector, including investors, lenders, developers, brokers and owners/operators, weighed in on their near-term concerns about pressures on occupancies, expenses and rent growth. Long-term views are optimistic about future performance.

Not surprisingly, net operating incomes for senior housing investors have been hard hit, with 90% of respondents reporting at least some uptick in expenses between March and August, mostly as a result of staff bonus pay, resident and staff testing and personal protective equipment. Respondents reported a mean increase in expenses of just under 10%. More than half of respondents (57%), however, expect these expense increases to become permanent due to the virus, whereas 22% think outlays will remain the same and 3% believing expenses will decline. Another 18% said they were unsure.

Operators also could see greater cost pressures in the form of higher property taxes and higher insurance costs that could affect future net operating income. 

“These are all subsets to operating expenses that could be meaningful going forward, and I do think they could have long-term impacts on our space,” Steve Blazejewski, managing director and senior portfolio manager for PGIM Real Estate’s seniors housing strategies, told NREI.

Respondents also weighed in on their expectations for property sales transactions and construction. Overall, 41% believe that transaction volume will decline over the next year, whereas 29% think it could increase and 30% said it likely will remain the same. Most respondents (58%) also expect that it will take more time to close transactions over the next 12 months.

Most respondents (63%) also think senior housing construction starts will decrease over the next 12 months, whereas 19% believe they will remain the same and 18% predict an increase. That is a notable shift compared with survey results over the past five years, where nearly half, if not more, of respondents consistently anticipated an increase in starts, NREI noted.