Investor Survey Reveals Optimism Toward Class B and Senior Housing

April 29, 2020

Investor Survey Reveals Optimism Toward Class B and Senior Housing

April 29, 2020

COVID-19 continues to have a significant influence on the multifamily industry. During a time when communication and collaboration are at their most important, Berkadia took the time to reach out to our investor partners for their input.

Our recently completed Capital Markets Apartment Investor Sentiment Survey collected responses from some of the keenest and experienced minds in the business. We outlined a few key takeaways that we think will be pertinent stories through the rest of 2020 and into next year.

Confidence in Class B Multifamily During COVID-19

The investors we reached out to feel very confident about the long-term potential for Class B assets. Faced with the potential for a sustained economic downturn, 45.7% of respondents rated Class B assets as a 4 or 5, with 5 being “extremely likely” to find success.

Of the same group of investors, just 15.3% felt the opposite, rating Class B assets as a 1 or 2. This compares favorably to Class A assets, as 29.3% of respondents expressed concern about the potential for core assets if COVID-19 continues to undermine our economy. This thinking may be motivated by the assumption that renters could shift down an asset class in order to improve financial security during a potential recession.

Mixed Expectations for Student Housing

According to our survey, 60.9% of investors rated student housing as a 1 or 2. With nearly all universities shifting to a 100% online curriculum, it seems investors are leaning toward a wait-and-see approach until the start of the 2020-21 academic year. If schools open again in the fall, then the outlook for student housing development changes dramatically.

Tenant Hardships Affect Collections

The overwhelmingly majority of respondents (74%) indicated that 0-19% of their tenants had requested or filed for rent forbearance as a result of COVID-19-related job or income loss. Interestingly, just 3% of respondents indicated that figure to be 80%-100%.

The overall low number of renters that have requested forbearance is in line with analysis by the National Multifamily Housing Council, which found that most renters were able to pay rent in April. As of April 29, approximately 91.5% of apartment households made a full or partial rent payment by April 26 compared to 95.6% from the same period one year prior.

Investors Bullish on Senior Housing After COVID-19

Those who responded to our survey expressed confidence in the seniors housing industry; 46.3% rated the asset class as a 4 or 5. Considering all of the uncertainty revolving around safety and social distancing, we reached out to Senior Director Chris Cain for input on his area of expertise and why investors are so bullish about the senior housing asset class recovering from COVID-19.

“One of the reasons that we believe our investors feel bullish about the long-term success of senior housing is the assets class’ status as a “needs based” product. After the recession, assisted living and memory care was the only real estate class that achieved continued rental growth,” said Cain. “We are already beginning to see indicators that are similar to those from the early days of the previous economic slowdown.”

The assumption is that that adult-aged children will do what it takes to find the right care for their aging parents, and that the number of those who can do so from their personal home is not expected to dramatically rise during or after COVID-19. This trend, combined with a predicted slowdown in construction, could set the stage for a strong rebound in occupancy as market panic surrounding the pandemic cools over.

More About the Investor Survey

A total of 471 industry professionals responded to our Capital Markets Apartment Investor Sentiment Survey. The majority of respondents indicated they solely pursue an active management strategy (261). Many participants selected multiple participation types.

We at Berkadia are proud to provide accurate, up-to-date information about the COVID-19 pandemic and its overwhelming impact on our industry. Please continue to visit the Berkadia blog for weekly updates on the topics we know matter most to investors and advisors.