Skilled Nursing capitalization rates are expected to decline by 34 basis points compared to the previous year, according to the CBRE’s Seniors Housing & Care Investor Survey.
This year, the survey conducted by the commercial real estate services and investment company polled a more select group of seniors housing investors, developers, lenders and brokers in the space.
Survey respondents expect a decrease among all seniors housing care categories, and skilled nursing was the only one expected to experience a lower-than-average cap rate decline. This indicates a potential shift in the market dynamics for this specific sector.
The greatest challenge faced by the seniors housing industry this year, according to the survey respondents, was the difficulty in maintaining adequate staffing levels. This issue was identified as the primary headwind affecting the industry, highlighting the importance of addressing staffing concerns to ensure quality care and operations.
The average seniors housing capitalization rate is expected to increase by 26 bps year over year. However, the average skilled nursing capitalization rate is anticipated to buck this trend and decrease by 34 bps. This divergence indicates a differing market outlook for skilled nursing compared to other segments within the seniors housing industry.
Survey respondents also identified assets with the lowest cap rates as being most negatively impacted by rising interest rates, suggesting that those properties with already low cap rates are more vulnerable to interest rate fluctuations, potentially affecting their profitability and investment value.
Looking ahead to the next 12 months, the survey revealed that over 75% of respondents expect rental rate increases of 3% or more across all asset classes, except skilled nursing. Researchers said this indicates a positive outlook for rental rate growth in most segments of the seniors housing industry, underlining the potential for favorable market conditions in the near future.
Investors use cap rates to assess investment opportunities and measure risk.
