Senior housing professionals seem to be of two minds about new development, according to a recent survey conducted by Capital One (NYSE: COF), a leading finance provider to the senior housing sector.
Though 41% of the senior housing professionals surveyed said they anticipate new development to offer the greatest investment opportunities in the coming year, 35% named potential overbuilding as their primary concern for the next 12 months.
Despite these concerns, Capital One is not going to immediately back off doing business in new development in places where there is a high volume of investment already occurring, Keith Kodrin, Capital One’s senior director of health care real estate, told Senior Housing News. However, the overbuilding concerns do warrant a cautious approach.
“We roll up our sleeves, we will visit each market that were are going to evaluate an opportunity for,” Kodrin explained. “We evaluate every construction opportunity individually, on its own merits.”
Senior housing executives at Senior Housing News’ 2015 Summit in Chicago echoed Kodrin’s sentiments about the importance of focusing on individual markets.
“You will live or die by your market selection,” Anthem Memory Care Principal Mark Rockwell said at the summit, which took place in July. “You can’t operate yourself out of a bad market.”
Meanwhile, 19% of Capital One survey respondents named the potential impact of higher interest rates as their top concern, and 20% worried most about the continued influx of new capital.
Though not directly related to the survey findings, Kodrin called out affordable senior housing as something he considers “a very huge opportunity for the industry.”
There is “very little focus on the middle-market, middle-tier resident,” Kodrin told SHN, adding that the demand in this market is growing.
Capital One conducted the survey on Sept. 17-18 at the IMN Real Estate Private Equity Forum on Senior Housing in Los Angeles. The survey involved 100 respondents, including senior housing operators, financing professionals, attorneys, capital providers and other industry professionals.
The survey also revealed 60% of respondents believe the pace of mergers and acquisitions in the sector will increase in the next 12 months. Still, 29% anticipate merger and acquisition activity to remain flat.
Written by Mary Kate Nelson