More noticeable, though, was a shift in this year's survey evident in the cap rate compression for investment class C assets. CBRE attributes this to increased interest from investors for value-add opportunities in a yield-constrained market.

The largest increase was reported for investment class A nursing care properties, up 24 basis points from a year ago. The likely explanation, CBRE says, is the uncertainty regarding healthcare legislation or investors' concerns over the surging pricing for nursing care properties in recent years.

By asset type, independent living eclipsed assisted living as the biggest opportunity for investment, increasing to 40% of respondents from 31% a year ago. Age-restricted properties also gained interest among investors, with more survey participants directing their attention towards the more lifestyle-focused spectrum of seniors housing.

Conversely, memory care properties continue to lose ground, with investors now seeing the least opportunity for this property type, says CBRE. Likely this is due to the overbuilding this segment has experienced in recent years.

It therefore follows that increased construction activity would remain the top concern for investors, cited by (38% of investors, among factors that could negatively impact the seniors housing and care market over the next 12 months. Coming in at second and third were,rising interest rates (22%) and property-level operation (21%). Rising interest rates showed the biggest increase, compared to 11% a year ago..

As the seniors sector goes through a period of “institutionalization,” says CBRE's Zach Bowyer, managing director, Valuation & Advisory Services, “the corresponding operational results will continue to evolve with greater efficiencies and innovative design trends, which will be welcomed by investors and developers in the face of increasing supply. The seniors housing investment market is expected to move into a more rational transaction period” as cap rates slowly increase.

A shift in investors' focus “from development and acquisitions to portfolio and operating platform optimization is also likely,” Bowyer says. “Sound property level operations, capital inflows from foreign investors, and moderated development trends will be critical to maintaining short-term valuations.”

LOS ANGELES—The prospect of higher interest rates isn't dimming the enthusiasm of investors in seniors housing & care real estate. CBRE's latest US Seniors Housing & Care Investor Survey finds that nearly 60% of respondents plan to increase the size of their portfolios this year, compared to 47% with a similar outlook 12 months ago.

“Investor interest in the seniors housing sector is clearly rising,” says Jeanette Rice, head of multifamily research, Americas at CBRE. “Favorable investment yields, the need-driven component of demand and the aging population storyline will continue to drive investment into the sector in 2017 and entrench its attractiveness to investors.”

CBRE expects valuations in the sector to remain stable in this year, “with a strong long-term outlook,” Rice says. “The industry's fundamentals suggest the necessity for more capacity over the long-term, with short-term oversupply in select markets becoming more likely as a result of the recent record-setting construction levels.”

By comparison with years prior, the change in expectations for cap rates was negligible in this year's survey, a response that points to the possibility for more pricing stability. The number of investors anticipating a rise in cap rates increased to 44% from 33% a year ago, with only 4% expecting to see a decrease. More than half, or 52%, expect stability in cap rates over the next year.

More noticeable, though, was a shift in this year's survey evident in the cap rate compression for investment class C assets. CBRE attributes this to increased interest from investors for value-add opportunities in a yield-constrained market.

The largest increase was reported for investment class A nursing care properties, up 24 basis points from a year ago. The likely explanation, CBRE says, is the uncertainty regarding healthcare legislation or investors' concerns over the surging pricing for nursing care properties in recent years.

By asset type, independent living eclipsed assisted living as the biggest opportunity for investment, increasing to 40% of respondents from 31% a year ago. Age-restricted properties also gained interest among investors, with more survey participants directing their attention towards the more lifestyle-focused spectrum of seniors housing.

Conversely, memory care properties continue to lose ground, with investors now seeing the least opportunity for this property type, says CBRE. Likely this is due to the overbuilding this segment has experienced in recent years.

It therefore follows that increased construction activity would remain the top concern for investors, cited by (38% of investors, among factors that could negatively impact the seniors housing and care market over the next 12 months. Coming in at second and third were,rising interest rates (22%) and property-level operation (21%). Rising interest rates showed the biggest increase, compared to 11% a year ago..

As the seniors sector goes through a period of “institutionalization,” says CBRE's Zach Bowyer, managing director, Valuation & Advisory Services, “the corresponding operational results will continue to evolve with greater efficiencies and innovative design trends, which will be welcomed by investors and developers in the face of increasing supply. The seniors housing investment market is expected to move into a more rational transaction period” as cap rates slowly increase.

A shift in investors' focus “from development and acquisitions to portfolio and operating platform optimization is also likely,” Bowyer says. “Sound property level operations, capital inflows from foreign investors, and moderated development trends will be critical to maintaining short-term valuations.”