Despite early concerns about the effects of the coronavirus, investors in the seniors housing and care industry already are seeing signs of rejuvenation, according to a report released Thursday.
Commercial real estate service firm JLL’s Senior Housing & Care Investor Survey and Trends Outlook found that rent collections remain stable with little to no change in loss to lease. Seniors housing and care operating expenses, however, have increased by 3% to 10% year to date. The virus has led operators to revise their budgets, projecting an annual increase of 4.4% to 11.6% for seniors housing and 8.1% to 12% for nursing care properties.
The report summarized survey responses from 109 investment sales professionals, debt providers, developers, private equity investors and other stakeholders.
Although 83% of survey participants indicated that they expect an increase in capitalization rates compared with prior to the pandemic, most believe this increase largely is attributed to the uncertainty of the current COVID-19 environment rather than underlying capital market conditions. As a result, most financiers expect capitalization rates to normalize eventually.
“Already, capital is starting to free up and deals are getting done,” the report noted.
Investors also reported that they saw the industry’s greatest opportunity for growth in more need-driven property types, such as assisted living. Among respondents, 42% identified assisted living as the biggest opportunity for investment, compared with 13% who chose independent living. In a January survey by JLL, only 27% of investors saw the biggest opportunity in assisted living, and 21% saw it in independent living.
“Long-term investor sentiment remains cautiously bullish as experts prepare for the ‘silver tsunami’ with the leading-edge baby boomer now within a 10-year investment cycle of occupancy,” report authors said. The oldest baby boomers now are 74 years old, whereas the youngest are 55.