Demand for senior living outpaced a continued slowdown in new supply in the first quarter, fueling an occupancy increase for the seventh consecutive quarter, according to new data from NIC MAP Vision released Thursday by the National Investment Center for Seniors Housing & Care.
The market fundamentals for the first quarter of 2023 revealed that the occupancy rate for senior living — assisted living and independent living combined — increased 0.3 percentage points, from 82.9% in the fourth quarter of 2022 to 83.2% in the first quarter. The report covers more than 15,000 senior living and nursing care properties in 140 metropolitan markets.
Although the increase marks the seventh consecutive quarterly occupancy rate increase, senior living occupancy remains 4 percentage points below its pre-pandemic high of 87.2% in the first quarter of 2020.
The latest rate gain was helped by a slowdown in inventory growth, which grew 0.3% from the fourth quarter of 2022 and 1.6% since the first quarter of 2022, near the lowest year-over-year increase since 2013.
More growth was seen in the more needs-based setting of assisted living than in the more choice-based setting of independent living. The assisted living occupancy rate jumped 0.7 percentage points from the previous quarter to 81.2%, whereas independent living occupancy remained flat at 85.2%, according to the data. The assisted living sector’s occupancy rate increased 7.3 percentage points from its pandemic low, 3.8 percentage points more than independent living, which was up 3.5 percentage points from its pandemic low.
In the long run, Caroline Clapp, NIC senior principle of research and analytics, told McKnight’s Senior Living, independent living has interesting trends of product types being developed, including more affordable options.
“We’re watching it closely in the short term given the flat growth and the fact that it’s choice-based,” Clapp said, adding that volatility with interest rates and a standstill in the housing market are influencing demand for independent living.
Regionally, only the Dallas (84.8%) and San Antonio (84.4%) markets have fully recovered and exceeded pre-pandemic senior living occupancy rates among the 31 primary markets that NIC MAP followers. Clapp said that Texas typically is seen as having no supply constraints, so it will be worth watching markets there to see whether they are benefiting from migration patterns as older adults move to warmer, more affordable parts of the country.
Boston (89.1%), Portland, OR (86.6%), and Baltimore (86.3%) had the highest occupancy rates among the primary markets, and Houston (78.5%), Cleveland (79.5%) and Atlanta (80.3%) had the lowest occupancy rates.
“The continued increase in senior housing occupancy rates was driven by positive net absorption coupled with limited new supply,” NIC Chief Operating Officer Chuck Harry said in a statement. “The likely ongoing recovery in senior housing fundamentals is further supported by the first quarter’s lowest rate of senior housing construction since 2014.”
Construction is expected to remain suppressed due to higher interest rates and a slowdown in financing, he added.
Senior living units under construction continued to trend lower in the first quarter, to 5.1%, down 2.7 percentage points from its historic peak of 7.8% in the fourth quarter of 2019.
“The increase in occupancy and rate growth should help to drive revenue growth, which may help senior housing properties offset some of the increased expenses related to higher costs of debt, labor, food and energy that have affected the industry in recent years,” Clapp said. “The steady improvement in market fundamentals against a backdrop of significant volatility in other parts of the economy illustrates the needs-driven demand for housing and care for older adults that the industry continues to meet.”