Senior housing occupancy rates have increased for the seventh consecutive quarter, according to a report by the National Investment Center for Seniors Housing & Care, which utilized data from NIC MAP Vision. Occupancy rates for the first quarter of 2023 were 83.2 percent, a 30 percent increase from the fourth quarter of 2022’s 82.9 percent occupancy rate.
Of the 31 metropolitan areas covered in the NIC MAP Vision’s data, Boston had the highest senior housing occupancy rate at the end of the first quarter of 2023 at 89.1 percent. Portland was second at 86.6 percent, with Baltimore in third place at 86.3 percent. The lowest was Houston at 78.5 percent, followed closely by Cleveland at 79.5 percent and Atlanta at 80.3 percent.
Few markets have grown to outperform their pre-pandemic occupancy levels. Of those studied only Dallas, at 84.8 percent, and San Antonio, with 84.4 percent, made the list. Despite cities not fully recovering, continued strength and increases in senior housing demand is anticipated.
Pandemic aftermath
The pandemic brought about a significant reduction in occupancy rates. In the second quarter of 2021, occupancy rates for senior housing dropped to 77.8 percent after reaching a high of 87.2 percent in the first quarter of 2020. According to NIC Map Vision data, senior housing occupancy rates are now trending upward.
Also increasing its occupancy rate from pandemic levels is the assisted living sector, which upped its occupancy rate to 81.9 percent, up 0.7 percentage points from fourth quarter of 2022. This marks a 7.3 percentage point increase in the occupancy rate for assisted living from its pandemic-related low. Independent living is up 3.5 percentage points in occupancy from its pandemic-relate low to 85.2 percent.
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COVID-19 didn’t just cause a decrease in occupancy, it caused a slow in senior housing construction that is now contributing to strong demand.
The future looks bright
One of the key factors regarding occupancy rates is a general slowdown in senior housing supply growth. New construction rates in senior housing are the lowest they have been since 2014, with inventory growth down 0.3 percent from the last quarter of 2022 and 1.6 percent on a year-over-year basis.
The first quarter of 2023 showed senior housing units under construction relative to the total existing senior housing inventory at 5.1 percent. Pre-pandemic, in the fourth quarter of 2019, that construction rate was 7.8 percent.
Not only are construction starts and new inventory rates down, but they are expected to stay that way, Chuck Harry, NIC’s COO said in prepared marks. The Federal Reserve’s continued interest rate hikes make obtaining financing for new projects difficult. High cost of capital could further fuel occupancy increases.
While there are lingering effects of the pandemic coupled with market volatility and rising interest rates, senior housing is anticipated to continue faring well. With occupancy rates, annual rent growth and annual absorption data all increasing from the fourth quarter of 2022 to the first quarter of 2023, the senior housing looks stable.
Find the full NIC MAP Vision report here.
