Cap rate data has been difficult to measure in the last couple of years, due to a fast-changing capital costs environment, a relatively fast-changing operating environment and, frankly, a relative absence of true “cap rate deals” where the buyer was valuing the trailing set of financials, without any funny business. Now, we are seeing more “cap rate deals” and look forward to providing our industry averages, broken out by property type, quality, age and performance in our next Senior Care Acquisition Report.
Anecdotally, what we are hearing is that cap rates are compressing slightly, but in the grand scheme of things, are staying relatively high relative to the record (and some may say foolish) lows when interest rates were at zero. CBRE also came out with its investor survey, conducted in October, reporting little change in cap rates from its April survey. In fact, 54% of respondents say there was no change in cap rates during that period.
The average seniors housing cap rate dropped eight basis points since April and the average skilled nursing cap rate fell by 11 basis points (from a higher level, to be sure). Those are small changes and reflect what we have been hearing, too.
If cap rates do compress in 2025, which they should, we do think enough lessons have been learned that they wont fall too low to not account for the operating and financial risk of owning a senior care property today. At least, we hope so.
