Senior Living Cap Rates Rise in 2023, Prospect of Supply-Demand Improvement in 2024 

Senior living capitalization rates have increased across all product types in the latter half of 2023, presenting challenges for investors. However, a new investor sentiment report from CBRE Valuation and Advisory Services suggests that the supply-demand dynamics are expected to improve in the new year. The report, based on a survey conducted in October and including responses from REITs, private investors, institutional investors, and developers, indicates that independent living, assisted living, and memory care have seen an average increase of 73 basis points in cap rates over the past six months. The report also highlights that market participants have encountered significant challenges over the past year, leading to substantial cap rate expansion, but predicts that the supply-demand balance will likely improve in 2024, leading to higher profitability and rent growth. The survey also indicates that respondents are anticipating a more than 3% rent increase for residents in 2024, with a significant number of respondents expecting even greater rent increases for active adult and assisted living. Overall, the report paints a picture of rising cap rates in 2023 but prospects of improvement and growth in the senior living market in the coming year.