NIC MAP Vision clients, with access to NIC MAP® data, attended a webinar in mid-April on key senior housing data trends during the first quarter of 2023. Findings were presented by NIC Analytics research team members. Key takeaways included the following:
Takeaway #1: Senior Housing Occupancy Rose 0.3 percentage points in 1Q 2023
The occupancy rate for senior housing—where senior housing is defined as the combination of the majority independent living and assisted living property types—rose 0.3 percentage points to 83.2% from the fourth quarter of 2022 to the first quarter of 2023 for the 31 NIC MAP Primary Markets. This marked the seventh consecutive quarter of occupancy increases.
At 83.2%, occupancy was 5.4 percentage points above its pandemic-related low of 77.8% recorded in the second quarter of 2021 and was 4.0 percentage points below its pre-pandemic level of 87.2% of the first quarter of 2020.
Demand as measured by the change in occupied inventory or net absorption moderated in the first quarter, increasing by 3,927 units in the Primary Markets after having increased by more than 8,000 units in the prior three quarters, but it was still well above the historical quarterly average of 2,251 units. The robust positive demand that has occurred over the past eight quarters has helped occupancy to improve.
Takeaway #2: Occupancy Recovery Continues, Led by Assisted Living
The chart below shows the pace of recovery to date for each property type and the gap remaining to reach pre-pandemic 1Q 2020 occupancy levels.
Independent living occupancy was up 3.5 percentage points from its 2021 trough with 4.5 percentage points remaining to reach its pre-pandemic level.
Assisted living occupancy was up 7.3 percentage points from its 2021 trough with 3.3 percentage points remaining to reach its pre-pandemic level.
Nursing home occupancy was also up 7.3 percentage points from its 2021 trough with 5.3 percentage points remaining to reach its pre-pandemic level.
Takeaway #3: Annual Inventory Growth Rate Has Slowed Significantly for Assisted Living
Annual inventory growth in the first quarter for independent living stood at 1.7%, near its pre-pandemic average of 1.6%.
Assisted living inventory grew by a similar amount in the first quarter at 1.6%, but this growth was half the typical growth recorded for assisted living before the onset of the pandemic, which was 3.2% annually.
This slower inventory growth stems from the slowdown in construction starts that we experienced during the height of the pandemic, a trend that occurred for both independent living and assisted living.
Takeaway #4: Occupancy Rate Improvements in 1Q 2023 Were Largest for Single Properties, Small Chains, and Large Chains
The greatest occupancy rate improvements in the first quarter were for single properties (up 0.6%) and for small chains (up 0.6%) with 2 to 4 properties, followed by large chains (up 0.5%) with 10 to 24 properties.
Single properties continued to have the highest occupancy rate at 86.1% with only 3.1 percentage points of occupancy left to recover to reach its pre-pandemic level.
Meanwhile, medium chains of 5 to 9 properties and very large chains of 25 or more properties saw no change in their average occupancy rates from the fourth quarter of 2022 to the first quarter of 2023.
Despite the unchanged occupancy rate, the smallest gap to achieve pre-pandemic occupancy was for the medium chains with 3.0 percentage points remaining to recover.
The very large chains still had the weakest occupancy rate at 79.5%, with another 5.2 percentage points still to be recovered.
Takeaway #5: Construction Activity Still Slow in Most Markets
The heat map below shows which markets were experiencing the most construction activity over time.
For perspective, for senior housing overall, construction totaled 5.1% of inventory for the Primary Markets in the first quarter of 2023, down from a peak of 7.8% in 2019.
The blue tones indicate that construction activity is relatively “cool” in most markets during recent quarters.
The markets that are shaded brighter red had the most construction as a percent of inventory in the first quarter. This group was led by San Jose at 13%, followed by Miami at 11%, and Denver, Portland, and Washington, DC all at 10%.
At the other end of the spectrum were markets where there was very little construction underway in the first quarter; this includes Pittsburgh at 0%, San Antonio at 1%, and Cincinnati, and Kansas City at 2%.
This article also appeared in the May edition of the NIC Insider newsletter.
About Caroline Clapp
Caroline Clapp is a Senior Principal at the National Investment Center for Seniors Housing & Care (NIC), where she serves as a subject matter expert and supports outreach for the senior housing industry. Prior to joining the staff at NIC, Ms. Clapp was a Vice President at AEW Capital Management. During her 15 years at AEW, Ms. Clapp was a member of the Investor Relations and Research groups, providing client service and real estate research for the firm’s private and public investment strategies. Prior to joining AEW, Ms. Clapp was a Financial Analyst at Entergy Corporation. Ms. Clapp holds a Master of Science in Finance from the Carroll School of Management at Boston College and a Bachelor of Science in Management from Tulane University. Ms. Clapp is a Chartered Financial Analyst® and a member of the CFA Society, Urban Land Institute, Women in Real Estate (WIRE), and CREW Network.
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