TSX:CSH.UN - Post Discussion
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retiredcf on Sep 19, 2023 9:11am
TD 2
CW's 2023 Seniors' Housing Report Takeaways
Event
Last week, Cushman & Wakefield released its annual Seniors' Housing Operating Performance Report (link) with data as of Q2/23.
Impact: SLIGHTLY POSITIVE
Our take: Overall, CW's report confirms the trends we have seen play out at both Chartwell and Sienna on a year-to-date basis and gives us increased confidence that the fundamentals are trending towards pre-pandemic levels. We expect continued occupancy gains based on the supply/demand dynamics outlined in the report, which in turn should continue to place upward pressure on rents and aid in further margin expansion. For Chartwell and Sienna, we currently forecast retirement occupancies to increase 660bps/570bps through 2025 and expect FY2025 margin gains of 820bps/480bps versus the depressed FY2022A levels.
Construction Starts (see Exhibit) of Seniors' Housing in Canada are expected to fall to a new cyclical low in 2023, with CW forecasting starts as a percentage of inventory at just 1.5% on the back of elevated construction costs and interest rates. This marks a continuation of the gradual decline in new supply seen since 2017 and is well below the 3.9% average over the last seven years. With construction time lines of 2-3 years, overall supply growth of ~3% in 2024 and declining thereafter, should lag demand growth as measured by the 4.2% CAGR of age 80 population growth in Canada through 2045 (per StatsCan). Looking forward, although the removal of GST (link) on purpose-built rental (includes Seniors' Housing) should aid development economics, we do not expect a meaningful boost in supply in the near-to-medium term.
Rent Growth in Q2/23 averaged 4-5% y/y across Canada — which we note is despite occupancies (details below) still lagging pre-pandemic levels. Stand- out markets included the Peel region in Ontario (+7%), Montreal/Quebec City (+6%) and Vancouver (+6%). Toronto was also relatively strong at +5%.
Occupancy. On average, national Seniors' Housing occupancy is up 550bps since Q2/21 following an 1100bps decline recorded during the pandemic (Q2/19-Q2/21). We note that Sienna and Chartwell appear to be outperforming the broader market, with retirement occupancy gains of 910bps and 510bps, respectively, during the same period. CW is forecasting 94.5% national occupancy for 2026.
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