Beth Burnham Mace headshot
Beth Burnham Mace

Occupancy in senior living communities in the first quarter increased for the third quarter in a row, according to NIC MAP data released Thursday afternoon related to the 31 primary markets that NIC MAP follows.

Average senior living occupancy (independent living and assisted living) was 80.6% in the first quarter, which marked a 0.2 percentage point increase from the fourth quarter of 2021 and a 2.5 percentage point increase from a pandemic-related low of 78% in the second quarter of 2021.

Assisted living led the way in occupancy growth in the quarter, with independent living occupancy declining slightly, although occupancy was higher in independent living than in assisted living.

Since reaching a low point of occupancy in the first quarter of 2021, assisted living’s “larger recovery” compared with independent living most likely is due to the fact that assisted living is needs-based, whereas independent living is choice-based, Beth Burnham Mace, chief economist and director of outreach for the National Investment Center for Seniors Housing & Care, told McKnight’s Senior Living.

“There was probably some pent-up demand for assisted living because of the need-based component,” she said, adding, however, that demand for both assisted living and independent living is being stoked now by older adults’ desire for socialization, which can be realized in senior housing.

In assisted living, occupancy increased 0.5 percentage point from the fourth quarter of 2021 to 77.9%, up from its pandemic low of 74.2% in the second quarter of 2021 but still below its pre-pandemic level of 84.6%. NIC said that demand for assisted living is dwarfing growth in inventory.

By comparison, independent living occupancy slipped 0.1 percentage point to 83.1% in the first quarter, still up 1.4 percentage points from its pandemic low of 81.7% in the second quarter of 2021 and still below its pre-pandemic level of 89.7%. Growth in inventory exceeded growth in demand for independent living, which pressured occupancy lower, NIC said.

Low supply

Across property types, NIC said, low supply could be a driver of the occupancy growth seen in the first quarter. Inventory growth in the first quarter was the weakest since 2013 because of the pandemic-driven slowdown in construction starts in 2020, and units under construction measured the lowest since 2015, according to the organization.

“It takes about two years for a senior housing property to be built and opened, so the low number of units under construction means that supply will likely stay low and support higher occupancy,” NIC Chief Operating Officer Chuck Harry said in a statement. “This is a positive trend for the industry as it recovers units vacated during the pandemic.”

“I would think that the slowdown in starts from a couple years ago would still continue to support moderate levels in inventory growth for probably the rest of this year,” Mace said. “And then ongoing positive demand growth should support further increases in the occupancy data.”

Annual rental rates rose across NIC MAP’s primary markets by 4.1% for assisted living in the first quarter. This was the largest increase since NIC MAP Vision began reporting the data in 2005. Annual growth in rental rates for independent living was 2.7%.

59% of units re-occupied

According to NIC MAP Vision, 59% of the senior living units within NIC MAP’s primary markets that were vacated during the pandemic now have been re-occupied.

Of those markets, Boston (85.5%), San Jose, CA (84.5%), and Portland, OR (84.4%), had the highest senior living occupancy. The markets with the lowest occupancy rates included Houston (76.7%), Atlanta (76.5%) and Cleveland (76.3%).

In markets such as Atlanta and Dallas, Mace said, it is relatively easy for developers to get land entitled and to be able to build.

“I’ve looked at the data pretty carefully,” she said. “It’s not that demand is poor or weak in those markets. They actually have strong demand drivers, but it’s just that supply gets ahead of it.”

Some better than average, some not

Mace said it’s important to remember that the data being reported are averages, “so that means there are a lot of properties that are doing better and a lot of properties that are doing worse than those averages.”

Overall, although average senior living occupancy was 80.6% in the first quarter, she said, almost 30% of such properties in the 31 primary markets had occupancy rates higher than 90%, and 14% of the properties had occupancy rates greater than 95%. On the other hand, 41% had occupancy rates below 80%.

The market-specific numbers varied as well, Mace said.

Overall, although 14% of properties in the 31 primary markets had occupancy rates greater than 95% and 41% had occupancies below 80%, she said, in Boston, 21% of properties had occupancy rates higher than 95% and 30% of properties had occupancy lower than 80%. By contrast, in Houston, 51% of properties had occupancy below 80%.

Still a long way to go

Senior living still has a way to go to make a full recovery, Mace said.

“Assisted living still has 6.8 percentage points of occupancy to get back to that pre-pandemic level, and independent living still has 6.6 percentage points left to go,” she said. “So the recovery will be supported by near-term, relatively weaker inventory growth, but we also need to get demand bolstered.”

Mace said she is “cautiously optimistic” about the recovery, but added that, “as an economist, I do worry about some of the broader trends going on in the economy.”

“Coming out of the pandemic, we have fears of inflation right now, fears of higher interest rates, as evidenced by the fed increasing interest rates right now. So that has translated into weaker consumer confidence, and that can have an impact on move-in rates for senior housing,” she added.

“But the counter to that is that the job market is still pretty strong. Gross domestic product growth was pretty strong last year, probably slowing this year,” Mace added. “But the job market is pretty strong, and household balance sheets are in generally pretty good shape. So there are a few things that are influencing. It’s a complicated world today.”