COVID-19 has upended the seniors living industry.
According to a recent report from Marcus & Millichap, the pandemic has dramatically reshaped the sector and will leave a lasting impact on daily operations, safety protocols and community design.
Others see similar trends in senior housing. “COVID has pushed revenues down in seniors’ housing,” Greg Limoncelli, a partner with Akerman, told GlobeSt in an earlier interview. “It has pushed expenses up and made people afraid to go into facilities. As a general rule, COVID has hit the industry hard.” https://www.globest.com/2020/10/16/senior-housing-occupancy-hits-record-low/
Still, demographics make the sector an excellent long-term bet going, according to Marcus & Millichap. As expenses increase and margins tighten, it sees consolidation on the horizon.
“The financial stress of the pandemic will create opportunities for seasoned operators to acquire troubled assets over the coming months and drive management efficiencies and boost occupancy,” according to Marcus & Millichap. “Industry consolidation will bring greater incorporation of technology and implementation of telehealth to facilities, among other safety and care improvements that will be essential in attracting new residents.”
In the immediate term, though, the pain is real. As move-ins have been restricted through the pandemic, occupancy levels fell to record lows in the second quarter. Since seniors are particularly vulnerable to the virus, Marcus & Millichap says the skilled nursing sector posted the steepest decline from the prior.
In primary markets, 28% of properties registered an occupancy rate of 80% or less at midyear, increasing from the first quarter.
In October, data from NIC MAP Data Service provided by the National Investment Center for Seniors Housing & Care echoed this trend. It showed that senior housing occupancy fell 2.6 percentage points in the third quarter of 2020, from 84.7% to 82.1%.
Pricing has also been affected.
Assisted living and independent living assets traded in the mid-$100,000 range on a per-unit basis, while skilled nursing properties have recorded an average price of approximately $80,000 per bed. Cap rates for assisted living and independent living cap rates flattened with the pandemic impacting sales activity, averaging in the low-6 to low-7 percent band over the past 12 months, according to Marcus & Millichap.
The good news is that an abundant amount of capital is chasing the sector.
“As visitor restrictions are lifted and greater clarity on long term occupancy trends emerge, transaction velocity will build momentum,” according to Marcus & Millichap.