The real estate market for senior housing is experiencing short-term COVID-19 challenges but is expected to show resilience over the long term, according to a valuation advisory prepared by Jones Lang LaSalle Inc.

Transactional activity has slowed and rent deferrals or loan forgiveness requests are increasing, according to the report, which the real estate services company presented at the Appraisal Institute last week.

"While COVID-19 is testing the recessionary resilient reputation of seniors housing, market participants do not expect changes in long-term demand," states the report. "The demographic 'silver tsunami' demand is building among baby boomers. The $2 trillion CARES Act will help the sector survive this pandemic."

In the short-term, JLL sees capitalization rates rising 25 to 75 basis points for active adult, independent living and assisted living facilities, and 50 to 100 bps for memory care and nursing care. But the real estate services company sees no long-term impact on discount rates, which it pegs at roughly 7 to 10 % for the former and 9 to 15 % for the latter.

Transactions are few right now. But "the way most investors and brokers are looking, if the owner wanted to wait three months or or however long this is likely to last, they're still willing to mark it at pre-COVID 19 pricing," says Zach Bowyer, a managing director for JLL in Boston. The pandemic, which has hit some nursing homes especially hard, is causing a decline in occupancy at living facilities. An April 12 survey of 146 seniors housing and skilled nursing operators indicated that 39% of independent living, 54% of assisted living, 38% of memory care, and 70% of nursing care properties experienced a decline in occupancy from the previous month, according to the JLL report.

At facilities unaffected by the virus, occupancy is holding steady or even increasing. Average daily rates at nursing homes have increased in most cases, according to the report.

Higher expenses related to insurance, staffing and personal protective equipment have had "a significant impact" on operating expenses, but are mostly expected to normalize once the pandemic is over.

"Like most other things, there are going to be a lot of changes in the industry" in the wake of the pandemic, Bowyer says. "Most of them for the better, to better protect their residents and their staff."

JLL says its initial research estimates negative net operating income for seniors housing in 2020, returning to a stabilized average of about 3% growth in 2021-2024.