Slow Motion Recovery Projected for Senior Housing

Senior housing REITs that got hammered during the pandemic are beginning to see the light at the end of the tunnel, as occupancy rates at nursing homes and assisted-living facilities ticked up in Q4 2021.

The Q4 senior housing occupancy rate was 81 percent, an improvement over the surge in vacancies during the pandemic, but still 6.4 percent below pre-pandemic levels. Occupancy rates for assisted-living facilities also increased in Q4 to 78 percent.

The senior housing and assisted-living occupancy rates have been incrementally improving by about 1 percent per quarter, with industry analysts expecting this pace to continue throughout 2022.

A 2022 outlook survey conducted by Senior Housing News, which drew 350 responses from industry professionals nationwide, asked when senior housing occupancy rates would return to pre-pandemic levels. About 36 percent of respondents said the full recovery would be achieved in the second half of this year, while 42 percent said it would happen in 2023. (The survey was taken in December, before the Omicron wave peaked in the US).

Despite the somewhat sluggish recovery, industry professionals and investors are bullish that the upswing in the senior housing market will continue to trend in a positive direction.

LCS, the second-largest senior living operator in the US, with about 135 communities, recently completed a recapitalization. The Des Moines, IA-based company told Senior Housing News it expects the momentum from strong Q4 move-in activity to continue throughout 2022. LCS said its December move-ins were the second-highest on record for that month. 

One of the largest Healthcare REITs with a significant portion of its portfolio invested in senior housing, Ventas, reported that its occupancy rate improved from 78.7 percent at the end of Q1 2021 to 83.3 percent at the end of the year.

Regardless of how many months it takes the senior housing sector to regain pre-pandemic occupancy levels, the demographics of an aging US population ensure that the coming years will be a golden age for healthcare REITs that specialize in nursing homes and assisted-living facilities.

CBRE estimates that 40,000 new senior housing units will need to be added to the national inventory every year for several years in order to meet demand from Baby Boomers.

There are now an estimated 9.3 million Americans over the age of 85, the most common move-in age for residents of senior housing. With 25 million Americans now over the age of 75, the number of people who hit the move-in threshold will keep increasing.

Industry analysts project that more than 2 million Americans will live in senior care communities by 2030, double the number that were in senior housing in 2016. By 2050, it is estimated that more than a fifth of the population of the US will be 65 or older, compared to 15.6 percent today.