‘Out-of-favour’ asset classes gaining interest amongst investors
LONDON: Gaining renewed focus are “out-of-favour” asset classes for which a catalyst exists that can turn them into “in-favour” asset classes, Dan Gorczycki, managing director of TrueRate Services, said.
Looking at those so-called out-of-favour asset classes, however, means thinking outside the box and not following the herd mentality of jumping on whatever is trending, he said. For investors in senior housing, this means understanding the nuances between types of properties — for instance, assisted living, independent living and age-restricted 55-plus, Gorczycki said.
Investors are “bullish” on senior housing and care in the post pandemic economy, according to JLL’s fifth annual Seniors Housing Investor Survey and Outlook, released in March. Some investors are turning to alternative asset classes, such as senior living, for growth.
Increasing investor interest in such alternative asset classes is among the main reasons for the rise in senior living transactions, according to JLL. By the end of 2021, transaction volume in senior housing communities and nursing care facilities was up 61% compared with the first quarter of that year, with $10.6 billion in transactions, according to JLL. The active adult, 55-plus sector (31%) moved ahead of assisted living (28%) this year as the most sought-after investment opportunity. Skilled nursing and independent living were tied in the next tier of opportunities, at 17% each.
“As a subset of alternative assets, seniors housing investor activity is set to flourish. The scale of the sector continues to grow and has depth in every market across the U.S.,” the report stated. “The long-term opportunity is quite attractive for institutional capital looking to diversify their portfolios or hedge against oversold investment classes.”
The annual Seniors Housing & Care Investor Survey from CBRE identifies new trends within the industry. The data is based on market sentiment of the most influential seniors housing investors, developers, lenders and brokers throughout the U.S.
This year’s CBRE’s Seniors Housing & Care Investors Survey, released in April, showed that the average senior housing capitalization rate fell by 13 basis points year-over-year and now was below the first half of fiscal year 2020 pre-pandemic average. Class B assets had an average capitalization rate compression of 17 basis points, followed by Class A assets, which experienced a 15-basis-point drop.
