Seniors Housing Fills Two-Thirds of Units Lost to Pandemic

Make it four straight months of occupancy growth in seniors housing, according to this week’s NIC MAP Vision report, and more than three-fourths (78%) of the units vacated during the pandemic have been re-occupied.

Overall, based on the 31 markets in the report, seniors housing occupancy increased 0.9 percentage points from 80.5% in Q1 2022 to 81.4% in Q2 2022.

This is the fourth consecutive quarter of occupancy growth, and occupancy is up 3.4 percentage points this quarter from a pandemic low of 78% in Q2 2021.

NIC COO Chuck Harry said in prepared remarks, “The continued upward occupancy trend despite workforce and supply challenges is a positive sign. Today’s economic challenges could present another hurdle for operators, but we cautiously believe that the upward trend in occupancy will continue because the need for senior housing remains strong.”

Quarterly demand was at its highest level since NIC MAP Vision began reporting the data in 2005. All housing types, particularly assisted living, saw improved occupancy for the quarter.

On the supply side, inventory increased by a lesser amount, 3,489 units, largely due to the pandemic-driven slowdown in construction starts in 2020. 

Rising materials prices, high inflation, construction industry labor shortages, and the Federal Reserve’s policy change toward higher interest rates are collectively stalling new constructions,” according to the report.

Starts were again weak in the second quarter, and units under construction measured the lowest since 2015.

Beth Burnham Mace, NIC’s chief economist, said in prepared remarks, “This will likely continue the trend of low to moderate levels of new inventory, which should help boost occupancy.” 

Boston (86.3%), Minneapolis (85.1%), and Portland (85.0%) had the highest senior housing occupancy rates within NIC MAP’s Primary Markets in the second quarter of 2022. The markets with the lowest occupancy rates included Houston (76.1%), Atlanta (77.8%), and Cleveland (78.2%).

‘Residents Having Fun Again’

Ted Flagg, senior managing director, JLL Capital Markets, tells GlobeSt.com, “Clearly, demand for senior housing is building as a result of the social value proposition of seniors communities restored with COVID-19 lockdowns in the rearview (i.e., families seeing residents having fun again); significant wealth effect from growing home values and recent catalysts to sell ahead of increasing mortgage rates; and an approximate 30% decrease in seniors supply since the pandemic onset tipping the supply/demand scale.”

“Take a look at the public REIT performance as a proxy for the private market – Welltower and Ventas same-store occupancy is up 500 bps over the last three quarters and projected to move up the same over the next three quarters.”

Occupancy Up 30% for Ryan Companies

Julie Ferguson, executive vice president of senior living, Ryan Companies, tells GlobeSt.com that Ryan Companies’ operating portfolio of 20 senior living communities in 11 states has not only gained back the occupancy lost during the pandemic, but also increased occupancy by over 30 percent.

“We opened five senior living communities during 2020-2021, which were some of the most challenging years for this sector,” Ferguson said. “However, these communities are leased as expected, consistent with our confidence for a strong senior housing rebound.”

Currently, Ryan Companies has eight communities under construction that are expected to be completed within the next 18 months. Construction starts were lower during 2021 and 2022 compared to pre-pandemic levels, which will result in strong absorption of units on the projects Ryan is delivering, she said.

Growth Strategies for Existing Campus Expansion

Michael Lincoln, principal at GreenRock Capital, tells GlobeSt.com that he is definitely seeing better quarter-over-quarter numbers on move-ins and occupancy rates. 

“This is evidence of the somewhat inelastic demand for senior housing and the strong demographic fundamentals,” Lincoln said. 

“Interestingly, on the new capacity side of the equation, the market is somewhat bifurcated. We see a lot more growth strategies around existing campus expansion and consolidation among the not-for profit sector. 

“Conversely, the for-profit senior housing segment continues to prefer new campus development. However, these new projects are taking more time to get in the ground as owners and developers (and lenders) thoroughly scrutinize risk elements of GMP contracts amid volatile construction costs.”

Best Practices and Protocols in Place

Greg West, Chief Executive Officer of ZOM Living, tells GlobeSt.com that he continues to see a shift from pandemic to endemic and senior housing operators are now equipped with best practices and protocols to reduce transmission, address cases when they surface, and ultimately keep senior housing residents safe. 

“ZOM Living is focused on delivering a level of design and amenities in more urban locations that excites its residents, where they are willing to pay a premium price to be a part of that attractive living experience,” West said. 

“Approximately two-thirds of the current senior housing inventory is 20-plus years old and does not align with the needs or wants of today’s senior consumers. This year, ZOM is focusing on identifying geographical markets and developing operating partnerships to scale our senior housing division, while also ensuring the successful opening of our three new senior living communities across South Florida.”

A Clear Need for Skilled Nursing, Assisted Living

Bill Colgan, Managing Partners at CHA Partners, tells GlobeSt.com, “In the current environment and as demand has continued to grow rapidly for senior housing properties, our focus has been to build scale with our LIVIA senior housing brand.

“There is clearly a need for skilled nursing and assisted living facilities, in particular, but quality of life is more than just meeting their healthcare needs. In developing LIVIA’s mission, we prioritized a hospitality-based approach with a focus on a concierge level of service. As new supply comes to market, we firmly believe that it’s these types of properties that will stand out among the rest.

CHA Partners recently celebrated a grand opening at its first LIVIA facility in East Hanover, N.J., which comprises 86 skilled nursing beds and 37 assisted living residences. Its second facility is currently under construction in Totowa, N.J.