Inside Seniors Housing’s 'Impressive Rebound' This Year

The seniors housing sector appears to be enjoying what analysts are calling an “impressive rebound,” with more than 30,000 units absorbed in the final months of 2021.

Nearly two-thirds of units relinquished during the pandemic were refilled in the second half of the year, following a four quarter period after the onset of COVID-19 in which 44,000 units were given up.

“The recovery last year was driven by a pent-up need for the care services that seniors housing communities provide, as well as a higher level of confidence among prospective residents once more of the population became vaccinated,” analysts from Marcus & Millichap write in a new analysis of the sector’s performance. “ This allowed move-ins to exceed pre-pandemic levels, while move-outs largely stabilized. Nonetheless, momentum was impeded in early 2022 amid the omicron surge, though case counts have since fallen and fears of community transmission have generally subsided.”

The sector as a whole saw 3.1% rent growth last year, though that uptick was largely offset by inflation and operating cost and wage increases. The American Health Care Association/ National Center for Assisted Living reported that staff shortages plagued more than 95% of nursing homes and assisted living communities last year, and  employment in assisted living, CCRCs and nursing homes each decreased by more than 10% from February 2020 to November 2021, according to the Bureau of Labor Statistics.

Most rent growth came from stabilized properties aggressively pushing up rates, according to Marcus & Millichap. But the industry is also poised to benefit from softer eligibility thresholds for Medicare and Medicaid, which together pay for 65% of long term care costs, in several states.

All in all, more investors are coming off the sidelines as more stabilized properties hit the market, and competition for those assets is fierce. As a result, a growing share of buyers is seeking upside prospects in fast growing regions like the Sun Belt, while others are converting distressed assets into mental and behavioral health centers.

Buyers are entering the market with “newfound confidence,” Kevin S. Kinigstein, lead partner of Cox, Castle & Nicholson’s seniors housing practice group, told GlobeSt in an earlier interview. 

“I don’t anticipate development slowing down either. The combination of these two factors should, in my opinion, lead to a very active year in transactional seniors housing,” he predicts.