The latest Senior Housing & Care Investor Survey, conducted by CBRE in October 2024, highlights key developments in the senior housing market. With insights from a 96% response rate among seasoned professionals and investors, the report sheds light on trends in capitalization rates, rent growth expectations, and investment opportunities.
Key Capitalization Rate Trends
- Stability and Modest Declines: A majority of respondents reported either no change or a decrease in cap rates compared to the April survey.
- Sector-Specific Insights:
- Active-Adult (AA): Cap rates dropped by 11 basis points (bps), reversing previous increases.
- Independent Living (IL) & Assisted Living (AL): Both saw cap rates decline by 10 bps on average.
- Skilled Nursing (SN): Decreased by 7 bps, recovering from an earlier rise.
- Memory Care (MC): Remained steady with no cap rate changes.
Notably, Non-Core Market, Class A Active-Adult and Assisted Living properties experienced the largest declines, with cap rates down by 14 bps and 15 bps, respectively.
Rent Growth Expectations
- Tempered Optimism: While 48% of respondents anticipate a 3% to 7% rent increase over the next 12 months, this is a significant drop from 63% in the previous survey.
- Flat Projections: A growing portion of investors (26%) expect no rent growth for Active-Adult communities in 2025.
- Skilled Nursing Challenges: Rent decreases were expected only in this asset class.
No respondents underwrote rent growth above 7%, a stark contrast to the 12% who projected such growth in April 2024.
Investment Insights: Emerging Trends
- Core vs. Non-Core Assets: Cap rate spreads between these categories remained unchanged at 54 bps, reflecting ongoing market stability.
- Freestanding Memory Care: This asset class was the sole outlier with a marginal increase in cap rates (up by 1-2 bps to 9.5%).
What This Means for Investors
The survey underscores a period of moderation in the senior housing market, with tempered rent growth expectations and relative stability in capitalization rates. Investors are increasingly cautious, focusing on asset-specific and geographic trends to inform decisions.
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