The CBRE Investor Survey was sent to influential senior housing investors, developers, and brokers throughout the U.S. with the objective of identifying key trends in the senior housing real estate industry in an effort to better understand the state of the rapidly evolving senior housing and care market.
The sector closed another record-setting year in 2015, with 514 institutional transactions closed and $18.7 billion in institutional sales, despite a slowdown in the fourth quarter, according to data from the National Investment Center for the Seniors Housing & Care Industry (NIC). The increase in volume over 2014 was 4.5%, revealing a significant decrease in growth rate, a trend that is consistent with the overall U.S. commercial real estate market.
Among the key findings from the survey: 48% of respondents expect no change in cap rates over the next 12-month period, while 31% expect an increase in cap rates; 21% are expecting to see compression.
The change in capitalization rates in 2015 was minimal compared to prior survey results, signaling that the market cycle is close to reaching a peak. Investor interest (old and new) remains high with 58% of respondents looking to increase their exposure to the space, while participation by public REITs in 2016 is a significant, yet unknown variable.
Senior housing cap rates have averaged at a spread of roughly 518 basis points (bps) to the 10-year Treasury, with the most recent indicated spread falling above the historical average at 554 bps. This indicates room for further compression as interest rates creep upward, according to CBRE. As a point of reference, multifamily cap rates currently represent a 215 bps spread.
Total senior housing returns were reported at 16.3%, 14.8%, and 13.3% over a one-, five-, and 10-year period. These returns have outperformed multifamily returns and the NCREIF Property Index over the same periods.
The number of units under construction has increased from 22,975 at the end of 2012 to 48,903 as of 4Q 2015. With an average development period of 12 to 15 months, a significant portion of this supply will come on line in 2016. This is a major concern in the industry.
“The seniors housing landscape is evolving with the increased presence of sophisticated capital, market transparency, operational efficiencies and technological advances. This can be compared to the institutionalization that the multifamily sector experienced from the mid-1990s to early 2000s,” said Zach Bowyer, MAI, National Practice Leader for CBRE’s seniors housing specialty practice. “Increased investment activity, coupled with increased construction activity, has resulted in an increased demand for experienced operators. Growing pains are expected as the market expands, and property management continues to be a key factor in protecting the value of a seniors housing asset.”
For a PDF copy of the CBRE Senior Housing Investor Survey & Market Outlook, click here.
Related Stories
Multifamily Housing | Jun 15, 2023
Alliance of Pittsburgh building owners slashes carbon emissions by 45%
The Pittsburgh 2030 District, an alliance of property owners in the Pittsburgh area, says that it has reduced carbon emissions by 44.8% below baseline. Begun in 2012 under the guidance of the Green Building Alliance (GBA), the Pittsburgh 2030 District encompasses more than 86 million sf of space within 556 buildings.
Industry Research | Jun 15, 2023
Exurbs and emerging suburbs having fastest population growth, says Cushman & Wakefield
Recently released county and metro-level population growth data by the U.S. Census Bureau shows that the fastest growing areas are found in exurbs and emerging suburbs.
Engineers | Jun 14, 2023
The high cost of low maintenance
Walter P Moore’s Javier Balma, PhD, PE, SE, and Webb Wright, PE, identify the primary causes of engineering failures, define proactive versus reactive maintenance, recognize the reasons for deferred maintenance, and identify the financial and safety risks related to deferred maintenance.
Mixed-Use | Jun 12, 2023
Goettsch Partners completes its largest China project to date: a mixed-used, five-tower complex
Chicago-based global architecture firm Goettsch Partners (GP) recently announced the completion of its largest project in China to date: the China Resources Qianhai Center, a mixed-use complex in the Qianhai district of Shenzhen. Developed by CR Land, the project includes five towers totaling almost 472,000 square meters (4.6 million sf).
Mixed-Use | Jun 6, 2023
Public-private partnerships crucial to central business district revitalization
Central Business Districts are under pressure to keep themselves relevant as they face competition from new, vibrant mixed-use neighborhoods emerging across the world’s largest cities.
Multifamily Housing | Jun 6, 2023
Minnesota expected to adopt building code that would cut energy use by 80%
Minnesota Gov. Tim Walz is expected to soon sign a bill that would change the state’s commercial building code so that new structures would use 80% less energy when compared to a 2004 baseline standard. The legislation aims for full implementation of the new code by 2036.
Student Housing | Jun 5, 2023
The power of student engagement: How on-campus student housing can increase enrollment
Studies have confirmed that students are more likely to graduate when they live on campus, particularly when the on-campus experience encourages student learning and engagement, writes Design Collaborative's Nathan Woods, AIA.
Multifamily Housing | Jun 1, 2023
Income-based electric bills spark debate on whether they would harm or hurt EV and heat pump adoption
Starting in 2024, the electric bills of most Californians could be based not only on how much power they use, but also on how much money they make. Those who have higher incomes would pay more; those with lower incomes would see their electric bills decline - a concept known as income-based electric bills.
Multifamily Housing | May 30, 2023
Boston’s new stretch code requires new multifamily structures to meet Passive House building requirements
Phius certifications are expected to become more common as states and cities boost green building standards. The City of Boston recently adopted Massachusetts’s so-called opt-in building code, a set of sustainability standards that goes beyond the standard state code.
Multifamily Housing | May 30, 2023
Milhaus, Gershman Partners, and Citimark close on $70 million multifamily development in Indy
Versa will bring 233 studio and one- and two-bedroom apartments to Indianapolis's $271 million, Class-A Broad Ripple Village development enterprise.
