The long-term outlook for the US senior living market is positive, according to Berkadia’s US Seniors Housing Commentary for Spring 2023.
The market is showing continued signs of recovery from the COVID-19 pandemic. That, and the increasing number of baby boomers — those born between 1945 and 1964 — are driving driving demand, according to the report.
“While the pandemic caused a slowdown in new construction and development, the uptick in demand for high-quality, well-managed properties is providing opportunities for seniors housing investors,” the authors noted.
Finance companies have replaced banks as the second-largest provider of debt and financing in 2022, according to Berkadia. Regional banks — notably Silvergate, SVB and Signature Bank — are facing significant disruptions. Fannie Mae and Freddie Mac are leading the pack among funding sources for senior living, according to the report, with available equity in both organizations.
“The largest hurdle with respect to the agencies is that many properties do not currently
qualify for permanent financing as margins have been depressed across the industry,” the authors said.
The experts at Berkadia expect lenders to hold back on extending credit as they watch to see whether the United States enters a full blown recession later this year.
Labor challenges have adversely affected the senior living sector for at least the past three years. The good news, according to Berkadia, is that available labor is expected to increase.
“The Fed’s determination of lowering inflation will have a positive impact on seniors housing owners because as unemployment increases, more labor will be available to work in communities,” Managing Director of Investment Sales Mike Garbers said. “This will help normalize expenses by year-end and should cause an increased volume in closed transactions.”
