The Short- and Long-Term Implications of COVID-19 for Seniors Housing
There will be pain in the immediate future, especially for independent living, and some lasting changes in operating procedures.
April 13, 2020 | John Powell | National Real Estate Investor
The coronavirus crisis has rapidly become a major part of Americans’ everyday lives and many of us are thinking about the most vulnerable among us: seniors. The virus has and will continue to impact all sectors of the commercial real estate industry, including seniors housing—independent living, assisted living, and nursing home properties that seniors call home. Coronavirus is creating industrywide uncertainty in the short-term. However, while there is likely to be a new normal as with so many aspects of our lives, the long-term outlook for seniors housing remains positive.
Short-term implications
Understandably, buyers and lenders are taking a more cautious approach to due diligence and underwriting now and will continue to do so for the foreseeable future. Buyers and lenders are facing entirely new considerations and questions: they’re examining whether there have already been cases of the virus at a property, looking at protocols for protecting against and dealing with the virus, and more heavily weighing leasing and occupancy trends. As a result, in the weeks and months ahead, there will likely be fewer transactions, greater selectivity in the transactions that get completed, and wider loan spreads as additional risk premiums are assigned to this sector.
As more and more property managers place restrictions on outside visitors to protect the health of seniors, leasing activity could be impacted too. Restrictions limit showings for potential new residents and create difficulties coordinating the moving in and out of properties for those already through the process. For seniors in independent living properties, they may choose to stay in their homes longer as opposed to moving into more densely populated facilities. There will likely be greater demand for home health care services as well. Especially for the middle market, loss of net worth due to the severe downturn could further delay a move from one’s home. All these factors could stress occupancy.
