Reinstatement of qualified nurses expected in six to 18 months, lower cap rates

As the road to recovery continues for the housing and senior care industry, a new survey from real estate giant CBRE, released this month, indicates significant growth in short-term investment with a recovery full expected in the course of 2022.

With the skilled nurse mergers and acquisitions market hotter than ever at the moment, summer cap rates for these facilities are falling as it experienced the second largest squeeze from the second half of the year. year among all types of properties.

The cap rates for the most desirable Class A nursing facilities in central locations averaged 10.9%, according to CBRE Summer 201 Housing and Seniors Care Survey – a figure which rose to 11.7% for class B properties and 13.3% for class C properties because the best assets are considered to present the lowest risk.

“Skilled nursing has shown additional squeeze after being the one with the most investor activity, the fastest during COVID,” said James Graber, national practice manager for housing and health care services assessment and advice from CBRE, in an interview with Skilled Nursing News. “They were definitely the first to come back to the market and I think that is a testament to the depth of the people who are in this space and who understand skilled nursing.”

While the SNF cap rate rose slightly from the first half of 2020 to the second half of 2020, this trend was quickly reversed as the market warmed. Cap rates share an inverse relationship with prices, so when cap rates decline, prices rise, as noted in a recent outlook report released by Calabasas, Calif., Real estate brokerage firm Marcus & Millichap. .

CBRE Seniors Housing & Care Investor survey results, H1 2021

Overall, the gap between core and non-core assets has widened, representing a flight to quality for investors, CBRE observed in its analysis.

However, respondents consistently indicated less interest in investing in skilled nursing assets compared to other categories of senior housing and care, such as active and independent adult living facilities.

Results of the CBRE Seniors Housing & Care Investor survey, H1 2021

Memory care and skilled nursing both showed a significant drop in investor perception of opportunities, as higher acuity trades were viewed as riskier investments.

Only 6% of those surveyed wanted to invest in skilled nursing care, up from 11% in the second half of last year.

Graber admitted that this may have more to do with public perception of SNSFs at the moment than the actual interest of buyers.

“I think this shows that the investor pool is a bit smaller for skilled nursing,” Graber said. “When you look at a global segment of the people interviewed in this survey, not all of them are active in skilled nursing. ”

Outside of working adults, the skilled nursing sector was the most optimistic for the next 18 months, with nearly 44% of respondents expecting census levels to stabilize at pre-COVID levels in the past. Next 12 to 18 months.

Just over 10% of those polled said it would take 24 months or more for skilled nursing facilities to return to pre-COVID levels.

CBRE Seniors Housing & Care Investor survey results, H1 2021

Graber felt that the return of elective surgeries, which were suspended during COVID, helped bolster the number of SNFs.

“It will come back faster than most levels of care because it is the highest need,” he said.

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