Alternative Assets

2023 Investor Sentiment Survey

November 2022

December 6, 2022 5 Minute Read

2023 Investor Sentiment Survey

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Given the challenges posed by the global pandemic and the uncertain economic environment, CBRE Alternative Assets group conducted a 2023 Investor Sentiment Survey in November 2022 to further understand the 2023 outlook of the Canadian Hotel, Senior Living, and Student Accommodation Sectors.

CBRE Alternative Assets surveyed the most senior individuals (CEOs, CIOs, CFOs) of the largest and most active ownership groups in Canada across the hotels, senior living, and student housing sectors.

Overview

Nearly 60% of respondents believe there will be a recession in 2023 and nearly 20% of respondents believe stagflation will be the primary theme in the economy in 2023.

 

Over 75% of respondents believe that interest rates will continue to increase over the next 12 months while only 9% believe they will decrease.

 

Two-thirds of investors are expecting a discount to valuations of 5% or more as a result of the rising interest rate environment.

 

90% of investors across all verticals are expecting an increase in cap rates while 25% of student accommodation investors are expecting a decrease or no change to cap rates.

 

The majority of investors in the Hotels and Students are underwriting demand that has returned to pre-pandemic levels with the Seniors sector lagging in the recovery expecting demand to return full sometime in late-2023 on average.

 

Nearly half of investors across all verticals are underwriting rate growth to increase between 5-6% in 2023. An additional 12% of investors are underwriting rate growth at 7% or higher. Hoteliers expect the lease rate growth with nearly one-third of respondents expecting rate growth between 0-2%.

 

Over 50% of investors across in the Seniors and Student sectors are underwriting overall operating cost inflation between 5-6% in 2023. The majority of Hoteliers are underwriting operating cost inflation of 3-4% in 2023 while virtually all investors are underwriting operating cost inflation of either 3-4% or 5-6%.

 

Hotels & Resorts

64% - Planning to "Buy More" or "Buy About the Same" in 2023

 

32% - Planning to "Sell More" or "Sell About the Same" in 2023

 

32% - Planning to "Develop More" or "Develop About the Same" in 2023

 

36% of Hoteliers plan to Buy in the short term (next one year). Over the medium/long term, this grows to 60% (next three years) and 64% (next five years).

 

 

The majority of respondents believe a potential recession will be the most significant risk to demand (occupancy) growth in 2023. Nearly one-quarter believe there will be a pull back of leisure travel, following initial post-pandemic trips.

 

The majority of respondents believe labour shortages will be the most significant challenge in 2023 while 44% believe the uncertain economic environment/rising interest rates will be the most significant challenge.

 

Senior Living

52% - Planning to "Buy More" or "Buy About the Same" in 2023

 

15% - Planning to "Sell More" or "Sell About the Same" in 2023

 

57% - Planning to "Develop More" or "Develop About the Same" in 2023

 

Given impressive demographics in the sector, virtually all investors in the sectors describe their investment strategies as Buy in the medium/long term (3-5 years).

 

95% of respondents believe there will be cap rate expansion to some degree in 2023.

 

The majority of respondents believe the perception of safety surrounding the pandemic will be the most significant risk to demand (occupancy) growth in 2023.

 

48% of respondents believe labour shortages will be the most significant challenge in 2023 while 19% believe the uncertain economic environment/rising interest rates will be the most significant challenge.

 

Student Housing

75% - Planning to "Buy More" or "Buy About the Same" in 2023

 

33% - Planning to "Sell More" or "Sell About the Same" in 2023

 

67% - Planning to "Develop More" or "Develop About the Same" in 2023

 

Given impressive demographics in the sector, the vast majority of investors in the sectors describe their investment strategies as Buy in the medium/long term (3-5 years).

 

75% of respondents believe there will be cap rate expansion to some degree in 2023.

 

The majority of respondents believe the [lack of] a significant return of international students will be the most significant risk to demand (occupancy) growth in 2023. 25% believe a [lack of] a significant return to in-person learning will be the most significant risk to demand (occupancy) growth in 2023.

 

58% of respondents private investment will the most prominent vehicle for Purpose Built Student Accommodation (PBSA) investment over the next 10 years while 42% of respondents believe PPP will be the most prominenet investment vehicle.

 

88% of respondents believe the uncertain economic environment/rising interest rates will be the most significant challenge while 25% believe expense escalation will be the most significant challenge.

 

Contacts