Senior Housing Demand Continues to Increase Faster Than Supply

A new data analysis from the National Investment Center for Seniors Housing & Care suggests that the demand for senior housing increasingly exceeds the number of available units in the third quarter of 2024.

Senior housing occupancy for 31 primary data markets of NIC MAP Vision, a company that provides geospatial and market selection analytics for the senior housing and care sector and a subsidiary of the National Investment Center, increased 70 basis points from 85.8% in 2024 Q2 to 86.5% in Q3. the third quarter. Annual average rent growth was 4.2%, with annual absorption of 3.9%, annual inventory growth of 1.1%, and construction versus inventory of 3.5%.

It shouldn’t be a surprise. The fundamental story of how senior housing demand keeps outpacing supply has been true for years. And it keeps getting worse, creating in turn an affordability crisis.

The specifics differed by majority independent living (IL), majority assisted living (AL), and majority nursing care (NC). IL saw 87.9% occupancy, 4.0% annual rent growth, 3.3% annual absorption, 1.1% annual inventory growth, and 3.0% construction versus inventory.

For AL, the figures were 85.1% occupancy, 4.4% annual rent growth, 4.5% annual absorption, 1.2% annual inventory growth, and 4.0% construction versus inventory.

As for NC, occupancy was 84.5%, 4.1% annual rent growth, 2.1% annual absorption, -0.5% annual inventory growth, and 0.2% construction versus inventory.

The transaction volume for the quarter was roughly $1.5 billion for IL and AL with a rolling four-quarter price per unit of $114,284, and $743.4 million in NC with a four-quarter price per unit of $82,196.

“As more Baby Boomers reach their 60s and 70s, demand for senior housing is expected to continue increasing and ultimately exceed pre-pandemic occupancy levels by the end of the year,” Lisa McCracken, NIC’s head of research and analytics, said in prepared remarks. She continued that increased demand plus the Fed’s recent interest rate cuts “are encouraging signals” that conditions for better growth could be ahead.

Senior housing affordability has been a problem for years. It will take significant growth in construction to reduce the pricing pressure.

At the same time, the conditions have created a desirable CRE asset type, Arick Morton, chief executive officer of NIC MAP Vision, told GlobeSt.com in August 2024.

“There’s a significant generational opportunity for investors in senior housing development and acquisition,” Morton said. “As the demand for senior housing grows, investing in this sector will result in substantial returns and long-term growth. It’s the early foreshocks of what is going to be a demographic earthquake over the next 25 years, as the boomers age.”