A temporary uptick in inflation could loom on the horizon, affecting the senior living market, according to a new report from Marcus & Millichap.
“The rapid increase in money supply from multiple stimulus provisions paired with low interest rates and disrupted supply chains has led to higher inflation, with core CPI climbing 3.8% annually in May,” according to the real estate investment company’s mid-year senior living outlook published Friday.
Public entities such as real estate investment trusts stepped on the brakes during the coronavirus pandemic, the company said. Acquisitions within senior housing were down more than 60% year over year.
Even so, the investment outlook is positive, Marcus & Millichap said, especially for companies that were in good financial standing before the pandemic. The second half of the year will be telling for struggling companies, the report authors said.
“Overall, while lending volume is not anticipated to recover to 2019 levels, the impact of the health crisis on capital availability is expected to be less severe than that of the global financial crisis,” the report stated.
REITs slowly are increasing activity after a 60% decrease over the previous year, which should mean increased competition in the second half, the authors predicted.
The outlook is especially good for Sunbelt markets as baby boomers from the North relocate to warmer climates. The 65-plus cohort in the 10 most populous markets in Florida and Texas each are projected to grow by at least 35% over the next decade, according to the report. The prospects are even better for senior markets in Phoenix and Las Vegas, which are expected to grow by an estimated 45% or more within the next 10 years.
