NIC Chief Economist Beth Burnham Mace

The coronavirus situation is changing rapidly, but National Investment Center for Seniors Housing and Care Chief Economist Beth Burnham Mace recently spent some quality social distancing time on the telephone with McKnight’s Senior Living to share her insights on where things stand and where they might be headed.

2020 started out relatively well for senior living. How has the coronavirus affected things?

In terms of areas of impact, I’ve spent a lot of time thinking about this, and I think there are six interconnected areas of industry impact, although that might change over time.

The first impact involves the residents and healthcare workers. That is safety and staffing issues and what operators are doing to provide staffing. A lot of operators are building contingency plans — for instance, how much staff would have to be replaced if they got sick? This area also involves all of the different cleaning protocols and contact intervention protocols and limitations on visits.

The second area of impact is operations — what impact is COVID-19 having on move-in and move-out rates, occupancy patterns and construction development plans. There’s a lot of speculation and hearsay right now about what’s going on. Toward that end, NIC is creating a new survey tool that we’ll be sending out to operators to try to gauge what’s going on.

The third is simply a broad economic impact, on confidence levels, on people’s willingness and ability to move. In my view, we are in a recession, and we’re likely to go deeper into recession in the second quarter. We know from experiences in the past that the economy does have an impact on demand and on supply conditions.

In a period of slowdown in the economy, there are two effects on consumer behavior. One is their confidence, and a second would be their means. The two go hand-in-hand, and for a lot of individuals, that’s not going to be the case for a while.

In the last downturn in 2008-2009, we saw that senior housing was recession-resilient, not necessarily recession-resistant. We saw a loss of occupancy more so in independent living than in assisted living because of the need-based component of assisted living. We didn’t see any decline in actual rents. And from an investor return point, there was some decline, but it wasn’t nearly as severe as it was for the other property types. So now we’ll have to wait to see what the impact of this recession will be on the senior housing sector. This is unprecedented in terms of the impact on consumers, the retail sector and the manufacturing sector. Our world is globally interconnected, and what happens in one part of the world does, in fact, affect us in the rest of the world through the linkages that we’ve created.

The fourth impact is the financial markets. Credit really makes the economy spin. Without credit, the economy would grind to a halt, and this is a big concern for the Federal Reserve and for monetary policy. In the past few weeks, the Federal Reserve has been trying to keep the credit markets open and functioning. This translates into how banks are responding to this crisis, and that translates into the cost of capital and how much financing is going to be available to finance senior housing deals.

The fifth area is transactions and pricing. We’re starting to see a slowdown in transaction activity, and part of the reason for that is that we simply don’t have people who can go out and do the walk-around tours that you need to do evaluations. We need some type of transparency in the world of buying and selling any kind of real estate. There’s less transparency in terms of what the pricing is, so that that’s having an impact on that market.

And the sixth area is construction. In senior housing, the delivery pipeline has been pretty intense in certain markets, such as Atlanta, for quite a long time. The COVID-19 pandemic is going to affect that. Cities like San Francisco and Boston have mandated that all nonessential commercial real estate construction cease for the immediate future. Because of cutbacks in who can be working and who can’t be working, there’s going to be an issue in terms of government workers being able to provide a permit for the inspection processes. And we also know that supply chain disruption translates into higher pricing for a lot of materials, and that’s going to create cost overruns and another set of challenges for developers and operators and investors.

What can we learn from the past?

We will get through this, and then the question becomes what the recovery will be like, whenever that happens.

The way a lot of people think about that is as the shape of different letters. The V shape, the W, the L and the U. And all of those portend different ways of improvement in the economy. With the V, we go down hard and deep, but we come back up fairly quickly. The W would be like what we saw in the early 1980s; we had a recovery, but it wasn’t huge, and then it went down again and then back up. That was the shape during the Great Depression, too. There was a series of ups and downs, like a W or maybe a double W. The U is sort of a slow recovery. The last recovery from the most recent recession was probably an elongated U. It came down, but it was flat for a long time and then it came up, but kind of gradually. And then the L goes down and stays down for a long time.

It’s hard to know what will happen, but we’re all wishing for a good letter.

This interview will appear in McKnight’s Senior Living’s April print magazine. To subscribe, visit