PricewaterhouseCoopers and the Urban Land Institute recently released their annual Emerging Trends in Real Estate report for 2014 and their findings indicate that industry professionals believe the overall real estate market, including seniors housing, should have a banner year in 2014. In accordance with the report’s findings senior housing participants who are interested in taking advantage of the sector’s growth by obtaining financing for acquisitions or other needs should continue to look to Cambridge Realty Capital for the many different financing options it offers.
The Report’s Findings
The Emerging Trends in Real Estate 2014 report is comprised of information that PWC and the Urban Institute collected from over 1,000 industry professionals, including investors, fund managers, developers, property companies, lenders, brokers, advisers, and consultants. Their feedback and insights on the industry’s prospects this year are highly instructive. For example, the vast majority of these professionals expect to see increased growth and demand across all property types this year due to the continued economic recovery, increased job growth, the recovering housing market, solid corporate profits, and the continued aging of the population. They also believe that as the economy grows, interest rates will rise slightly this year, causing cap rates to fall. As this happens, senior housing investors will look more to increasing cash flows instead of high cap rates to drive returns. This shift in emphasis from cap rates and appreciation to cash flows and facility performance will increase the importance of effective property management in seniors housing. Furthermore, although interest rates are expected to increase most of the people that were surveyed believe that any increase will be slight to moderate and that the market will be able to handle it effectively. Indeed, a number of respondents noted that higher borrowing costs will be offset by increased demand, higher occupancy, and growing rents. The key will be the timing and pace of rate increases and this is one of the reasons why everyone is keeping an eye on the Federal Reserve to try to gauge when it might raise the fed funds rate.
With respect to capital, the report found that the attractiveness of the sector will lead to increased availability of both debt and equity capital this year. Additional equity capital should come from wealthy investors, institutional investors, global investors, sovereign wealth funds, and real estate investment trusts. Meanwhile, increases in debt capital are expected to come from banks, mortgage REITS, insurance companies, mezzanine lenders, non-traditional lenders, and the commercial mortgage-backed securities market.
We’re now a few months into the year and many of these insights appear accurate. The economy and housing market continue to improve, the unemployment rate has come down, demand for real estate assets across various sectors has increased, and cap rates have fallen. If these trends hold, 2014 should be the best year on record in some time for senior housing and other real estate classes, and this will provide an opportunity for senior housing participants to realize substantial returns. As the year progresses, senior housing providers and others who are interested in obtaining these returns through an acquisition, joint venture, development, or other wealth generating transactions should contact the successful senior housing financing firm Cambridge Realty Capital to learn more about the many different options it offers.