Seniors Housing Set for a 'Gangbusters' Next 18 Months
CBRE analyst said there’s pent-up activity that needs to clear.
“Gangbusters” is what CBRE’s Vice Chairman Aron Will says the seniors housing mergers and acquisitions market will look like in the next 18 months.
Speaking during a news video interview produced by his firm, Will said the capital markets will take time to work through its current state.
However, because deals were down the past few years while asset classes such as multifamily doubled and tripled, he said, seniors housing will have their moment.
“Banks don’t have a choice,” he said. “They are having to make tough decisions and put borrowers in a tough place,” he said. “Funds at the end of their runways. They are sometimes even in their extension option [period]. They’ve done it once already. Now, they have nowhere to go.”
Seniors housing is going to be busier given the capital markets challenges, he said.
“There’s pent-up activity that needs to clear,” according to Will. “I expect a lot of activity in our space. Sales of assets in lease-ups are not at the values that people would have hoped, yet things will begin to trade out of necessity.”
“Core-plus capital that reemerges will make relative value plays for stabilized seniors housing assets based on where it’s priced today for really good [properties] for the next 12 to 18 months. It’ll be active in that segment too, again, out of necessity.”
Will said that after some dark days (about six months intensely but really for the better part of two years) during the pandemic, seniors housing is at 84% census now and pushing rents by 6 percent to 12 percent as an industry, across the board in independent living, assisted living and memory care.
“Seniors housing will be a darling child given the needs-driven element of seniors housing today,” he said.
Seniors didn’t have cap rate compression coming out of COVID-19, unlike all the other CRE asset classes. Pricing has certainly increased at least 100 to 150 bps, but not as much as other CRE asset classes “because it was never really compressed to begin with given the suppressed operating fundamentals,” he said.