The Covid-19 pandemic pressure is prompting investors to become more interested in demand-based product types such as assisted living and memory care communities. Simultaneously, the price difference between Type A acquisitions and Type B acquisitions has increased, indicating that “investors are pursuing high quality throughout the pandemic.”
That gets based on the latest CBRE Senior Housing and Care Investor Survey, which details how investors view the senior housing market in the second half of 2020. The survey was released on Thursday and included stakeholders’ responses in various industries, such as private capital. Investors, brokers, developers, and institutional investors.
Assisted living ranks first again in investor interest in the second half of 2020, with 33% of the respondents considering the product type as the most significant investment opportunity. Nearly a quarter (22%) of the respondents said that independent living communities are the most significant investment opportunity, while 15% said it is valid for active adults. In contrast to CBRE’s previous survey this year (which ended at the end of February), the latter showed that the most significant investment opportunities are 30% assisted living, 27% independent living, and 28% active adult community.
Investors are also becoming more and more interested in the memory care community, rising from 4% in the first half of this year to 12% in the second half of this year. That is the most significant investment opportunity.
Regarding the occupancy rate trend, more than 70% of the respondents said that they expect the occupancy rate to increase in the next 12 months, while only 53% of the respondents in the first survey said. Only 15% of people expect the occupancy rate in the coming year will remain the same, while 14% said it would fall further.
The survey also showed that the capitalization rate has increased, and the active adult ceiling rate has increased the most, an average increase of 80 basis points over the previous survey. According to this survey, the upper limit ratio of assisted living and memory care communities has also increased by about 35 basis points on average.
The capitalization rate of Class A assets increased by 27 basis points. However, excluding active adult properties, Class A assets’ rate increased by only 15 basis points. In comparison, Class B and Class C assets increased by 28 basis points and 22 basis points, respectively.
The author of the report wrote: “The increase in the spread between the A and B interest rates also shows that the difference between the B and C interest rates has decreased, indicating that investors are pursuing quality throughout the pandemic.”
Looking ahead, 53% of the respondents expect that the capping rate will not change next year, while 36% of the respondents said they want the capping rate to increase, and 11% of the respondents said they expect the capping rate to be lower.
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