Senior housing investment is on the rise with strong potential heading into 2013, according to new findings from a fourth quarter survey conducted by National Real Estate Investor and Senior Housing Investment Advisors. The survey of 164 respondents including 117 directly involved in seniors housing as brokers, lenders, developers, owners or operators.
While total yearly portfolio sales volume is down, the outlook is optimistic, the survey reports, for acquisitions, construction and financing.
“The fundamentals and performance in this sector are compelling,” Mel Gamzon, SHIA president said in a report by NREI.
More than three quarters of investors said they expect new construction to rise during the next six months with 65% anticipating investment activity will be on the upswing. The outlook for financing is also strong, with 58% of respondents reporting they expect financing to loosen during the same time frame. Occupancy rates, too, are expected to increase, with 54% of those surveyed believing in the upward trend.
The activity during 2012 has slowed due to large REIT transactions in the previous 12 months, Gamzon said.
“It was very difficult to keep pace with that level of transaction volume,” Gamzon said in the NRE report. “What we now have is a more normalized market dynamic for real estate transactions in this industry.”
With respect to cap rates, the survey shows mixed results. While 45% of those in the survey expect no change in cap rates in the next six months, 29% expect rates to decrease and 24% expect rates to rise, NREI reports. The outlook is strong for repositioning, acquisitions and renovations (see chart).
“Demand for seniors housing properties remains high, which will encourage some owners that have been on the fence to put their properties on the market. Both U.S. and foreign investors are continuing to focus on seniors housing properties as a viable need-based real estate investment platform,” the NREI report states. “In addition, investors are seriously looking at not just core assets but value-add opportunities where repositioning of existing facilities programmatically will represent a major trend for the business over the coming six months.”
Written by Elizabeth Ecker