Senior living investors are optimistic that senior living occupancy will bounce back to pre-Covid levels in 2023, and that active adult represents the best opportunity for investment in 2022.
That’s according to a new CBRE Seniors Housing & Care Investor Survey. Among the 200 senior living investors who responded to the survey, more than three-quarters (82%) said they expect senior housing communities to reach pre-pandemic occupancy levels within 18 months, with lower-acuity communities seeing the fastest absorption.
Nearly all (89%) of the respondents extended the expected recovery timeline out to 24 months for higher-acuity buildings, such as assisted living and memory care communities.
According to the survey, 34% of respondents identified active adult as the best opportunity for investments in 2022, up from 31% in 2021.
The survey is among the latest that shows interest in active adult communities is still strong, as some investors believe the industry may have already seen the worst of the Covid-19 pandemic.
The bullish outlook on active adult is driven largely by the fact that residents of those communities are often younger and with fewer care needs, according to the report.
The survey respondents were also optimistic about opportunities in other segments of the industry: 26% named assisted living as the best opportunity for investment, while 23% said the same about independent living.
Seventy percent of respondents said they expect rental rates to increase this year by 1% to 7% in 2022, while 42% said they expect to see rate increases of 3% to 7% this year.
Active adult assets also enjoy an advantage when it comes to resident length of stay, as it is “much longer than multifamily market-rate apartments and certainly much longer than what you get in assisted living and independent living,” according to James Garber, managing director with CBRE Valuation & Advisory Services.
The active adult segment saw a year-over-year cap rate decrease of 26 basis points among core Class A assets and a decrease of 31 basis points among non-core Class A assets.
“They’ve compressed significantly,” said Garber. “I think there are significant upsides like rate increases for properties that are at or near stabilized.”
CBRE also surveyed the investors on top headwinds they see ahead. Availability and cost of staffing, inflation, interest rates, the pandemic and new supply and development topped the list.
“But senior housing has had significant staffing issues – affordability and availability – before the Covid-19 pandemic,” Graber said.
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