“Steadfast absorption sustains occupancy recovery” across memory care, assisted living and continuing care retirement / life plan communities, according to a new report from commercial real estate investment sales brokerage firm Marcus & Millichap.
Senior living absorption hit a five-quarter high in the final quarter of 2023, according to the report, with more than 11,000 senior living units absorbed, on net. The absorption rate in the quarter outpaced the three-year average of 8,500 units per quarter.
Marcus & Millichap said that with limited senior living development last year, inventory increased by less than 25% for the second year in a row.
“Looking forward, fewer than 37,000 total units were underway at the start of this year, representing less than 5% of existing inventory and the smallest active national pipeline in the last decade,” noted research associate Neel Sodhi, who prepared and edited the report.
At the same time, the demographic of Americans aged 75 or more years is expected to increase by almost 11 billion over the next 10 years. More than 80% of senior living residents are of this age, according to the report. By contrast, during the past decade, the population of people aged more than 75 years saw an increase of less than 6 million.
“These contrasting supply and demand dynamics are set to heavily influence sector performance moving forward,” Marcus & Millichap said.
Staffing shortages amid this surge in demand is concerning to operators, according to the company.
“Competitive wages in alternative industries and the burden of student loans for nursing staff have impacted operators’ ability to keep up with growing demand, which is expected to expand substantially over the next decade,” according to the report.
Rapid home appreciation — up to 46% since early 2000 — could be a boon to independent living operators in some cases, because this appreciation means that homeowners are paying more in property taxes. Combined with other inflationary measures, according to Marcus & Millichap, this occurrence could lead some older adults to sell their homes and transition to independent living communities.
