Skilled Nursing Occupancy Grows for 13th Straight Quarter

Skilled nursing occupancy continues to trend up across the country, although at a moderating pace. The sector logged the 13th straight quarter of occupancy increases during the three months through June, but the 30 basis point jump was the smallest gain recorded during that stretch, a Marcus & Millichap special report on the skilled nursing sector said.

Overall occupancy was 84% during the second quarter, down 220 basis points from the same point in 2019, and the 63,000 beds absorbed from April 2021 to mid-2024 still trails the 105,000 beds relinquished during the pandemic, said the report. Shrinking supply has bolstered occupancy growth, as national inventory fell by 0.6% for the year ended in June 2024 and 5% over the past seven years.

During the quarter, rents grew 4.1% on steady demand increases and a cutback in supply. Rents increased in every US region by at least 3%, led by the Great Plains and Rocky Mountain areas, which logged the fastest increases amid substantial inventory decreases, said the report.

The decrease in supply comes at a time when demand is expected to expand to service aging Baby Boomers. The nation’s 70-plus population is set to increase by nearly 20 million people by 2040 to reach 60 million total, which should provide upward occupancy momentum.

Skilled nursing deal flow has been hamstrung by higher interest rates and lender scrutiny since the pandemic, but with debt costs coming down, trading could begin to increase. Entry costs have also retreated, with the average per-bed sale price of $86,000 from July 2023 through June 2024, representing the lowest measure since 2019, according to Marcus & Millichap.