Senior Living Cap Rates Rise in 2023, Prospect of Supply-Demand Improvement in 2024 

Capitalization rates rose across all senior living product types in the latter half of 2023 as challenges remained stubborn. But the new year should bring more improvement to supply-demand dynamics.

That’s according to a new investor sentiment report for the second half of 2024 from CBRE Valuation and Advisory Services.

The survey, conducted in October, included responses from REITs, private investors, institutional investors and developers.


According to the most recent data, independent living, assisted living and memory care saw increasing cap rates by an average of 73 basis points over the past six months. The survey notes there were greater increases in Class C assets, a “reversal from the April survey,” where Class A assets saw the greatest increases.

In the past year, senior housing owner-operators and investors encountered “significant challenges,” and “refocused market attention on uncertainty related to forecasted occupancy and operating margin,” according to Daniel Lincoln, national practice leader of seniors housing and healthcare for CBRE.

“Combined with a higher cost of capital, market participants reported substantial cap rate expansion over a relatively short time period,” Lincoln wrote. “However, increasing fundamental demand drivers and restrained inventory growth will likely lead to marked improvement in supply-demand balance in 2024, with above average rent growth and higher profitability.”


Capitalization rate spreads were largely unchanged from the previous survey as well, with the exception being in Class C assets.

“The average spread between core and non-core assets was essentially unchanged,” the report’s authors wrote.

The average change per class was seen at 71 bps for Class A, 74 bps for Class B and 78 bps for Class C assets, with skilled nursing seeing the overall highest increases.

Rent growth for 2024 was also a primary topic of the survey. As a whole, an average of 77% of respondents reported an anticipation of a more than 3% rent increase for residents in 2024. Active adult had the most responses indicating a 3 to 7% increase from 63.3% of respondents. Assisted living could see the overall greatest rent increases, with 28.1% of respondents anticipating a greater than 7% increase.

No respondents reported an anticipation of decreased rates in the coming year.

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