Senior Housing Occupancy Falls to Lowest on Record

Last year, senior housing occupancy rates have dropped to record lows. A new report from the National Investment Center for Seniors Housing and Care, the senior housing occupancy rate fell 1.3% in the fourth quarter to 80.7%. In 2020, the senior housing occupancy rate fell 6.8%.

The rate of decline slowed in the fourth quarter; however the report expects occupancy rates to fall once again following the surge in COVID-19 cases this winter. The occupancy rate for independent living and assisted living fell at a similar rate in the fourth quarter. Independent living occupancy declined 1.4% quarter-over-quarter to 83.5%, while assisted living rates fell 1.3% to 77.7%. Nursing home occupancy rates fell the most significantly to 75.3%. Annually, independent living occupancy has decreased 7.4% while assisted living properties have had a 6.2% decrease in average occupancy.

The report also noted varied occupancy trends in geographic markets. NIC reviews 31 metropolitan areas. San Jose, San Francisco and Seattle had the highest occupancy, while Houston, Cleveland and Miami had the lowest occupancy rates for senior living properties.

Despite the decline in occupancy across asset types and location, senior housing rents increased this year. Overall, rents were up 1.4% in the fourth quarter. Independent living and assisted living rent growth was on trend, increasing 1.4% and 1.3% respectively. Nursing care facilities had the largest increase in rents, up 2% for the quarter.

New construction deliveries contributed to the dynamic of declining occupancy and rising rents. Senior housing inventory increased 2.9% in the fourth quarter, led by assisted living, which had 3.1% supply growth. Independent living inventory increased 2.7%. However, these new deliveries palled compared to 2019 inventory growth. The delivery of 1,625 units in the fourth quarter is the lowest on record since 2013.

Although senior housing has certainly taken a beating during the pandemic, there are signs of recovery. Taurus Investment Holdings and Northbridge Cos. formed a partnership to acquire six class-A senior housing properties for $200 million from the senior housing REIT Welltower. The acquisition of the 507-unit portfolio marked Taurus Investment Holdings’ foray into the senior housing space. The firm’s CEO Peter A. Merrigan noted this is an ideal time to enter the space: when prices are low.

This deal is a heartening sign, but somewhat of an anomaly in the current market. In the fourth quarter, senior housing investment totaled $1 billion with an average per unit price of $166,307, according to the NIC report.