Senior living, independent living and assisted living combined, is experiencing its highest occupancy increases since before the COVID-19 pandemic, with the number of occupied assisted living units rising to its highest level ever, according to the latest National Investment Center for Seniors Housing & Care data released Thursday.
The NIC MAP Market Fundamentals Data report revealed that assisted living demand has rebounded strongly, with occupancy increasing 1.1 percentage points to 79.7%, up 5.6 percentage points from its 74.1% pandemic low in the second quarter of 2021. The number of occupied assisted living units reached its highest level ever in the third quarter across NIC’s primary markets.
“That’s an important story,” NIC Chief Economist Beth Burnham Mace told McKnight’s Senior Living. “There have never been this many units occupied. It speaks to the demand for assisted living and the need for assisted living.”
Although she said there was probably some pandemic-fueled pent-up demand from people delaying a move into assisted living, she added that there also is fresh demand as the population ages and has greater needs.
But overall occupancy in assisted living has yet to reach its 84.6% pre-pandemic level, due to new inventory added during the pandemic.
Overall occupancy increases for fifth consecutive quarter
The senior living occupancy rate overall increased for the fifth consecutive quarter, rising one percentage point, from 81.2% in the second quarter to 82.2% in the third quarter, according to NIC MAP Vision data. Occupancy is up 4.3 percentage points in the third quarter, from a pandemic low of 77.9% in the second quarter of 2021.
Mace characterized the data, overall, as “generally positive,” saying that the demand for seniors living was only higher during one other quarter — the third quarter of 2021.
A surge in demand that strongly outpaced inventory growth is behind the increase, according to NIC. Just 2,300 units were added within the primary markets in the third quarter, the weakest inventory growth since the third quarter of 2013 other than the first quarter of this year.
Construction starts also continue to be slow given pressures affecting lenders. Mace said it takes 18 to 24 months from the start of a project to the opening of a community. The current construction slowdown, she said, is related to the economy and financial markets, suggesting that inventory growth will continue to be relatively lower than historical rates for the foreseeable future.
For operators, that means that less new competition is coming into the market.
“The rise in interest rates being imposed by a more restrictive Federal Reserve monetary policy, as well as economic uncertainty, has led to a marked slowdown in loan issuance, which suggests we’ll continue to see a relatively low pace of development in the next several months,” Mace said. “The slowdown in construction starts will act as a tail wind and support further gains in occupancy.”
The total number of occupied senior living units within the 31 NIC MAP primary markets is just 2,400 units shy of its pre-pandemic all-time high, according to NIC.
Independent living occupancy increased 0.9 percentage point to 84.7%, up 3 percentage points from its pandemic low of 81.7% in the second quarter of 2021. It remains below its pre-pandemic occupancy rate of 89.6%.
Regional market occupancy, rental rates also climbing
Of NIC MAP’s 31 primary markets, 29 saw occupancy increases in the third quarter. Boston (88.3%), Minneapolis (86.2%) and Portland (85.6%) had the highest senior living occupancy rates. Houston (76.8%), Atlanta (78.1%) and Cleveland (79.1%) had the lowest occupancy rates.
Rental rates across the primary markets also saw their largest increase since NIC began reporting data in 2006, increasing by 4.4% on a year-over-year basis in the third quarter.
“Occupancy continues its rebound, supported by near-record demand that has strengthened through 2022 after the omicron outbreak earlier in the year,” NIC Chief Operating Officer Chuck Harry said in a statement.
Source: KIMBERLY BONVISSUTO