Senior housing — independent living, assisted living and memory care — operating fundamentals regained favorable traction as 2022 unfolded, “following a painful couple of years,” and the trend is expected to continue in 2023. That’s according to the new US Senior Housing Outlook released by commercial real estate research and advisory firm Green Street.

Occupancy rates have recouped slightly more than half of the decline experienced during the pandemic. At the end of 2022, national occupancy sat approximately four percentage points below the pre-pandemic level, in the high 80% range, according to the report.

“In the senior housing sector, top-line prospects improved meaningfully last year, but expense pressures have and will likely continue to weigh on [net operating income] growth” Andrew McCulloch, global head of data and analytics at Green Street, said in a press release issued in conjunction with the report. “The sector is still early in its post-pandemic recovery, and [market revenue per available foot] growth, Green Street’s proprietary measure of rent and occupancy growth, is expected to average 6.5% over the next five years.”

Other key takeaways from the report: 

  • Senior housing operated portfolio net operating income growth forecasts published in December are unchanged and average 20% for 2023 and 2024;
  • Depressed occupancy, accelerating population growth and slowing supply support a robust outlook;
  • Penetration rates are poised to increase over time;
  • A low near-term risk of oversupply exists because it will take several years for supply growth to catch up with demand;
  • The odds of national occupancy setting a new high watermark seem good, with an anticipated average of 92% in 2027.

“Regionally, Sun Belt markets and select Midwest metros that benefit from higher penetration rates continued to enjoy strong pricing power in ’22, while coastal markets and a few demographically challenged Rust Belt markets lagged,” the report authors wrote.

Overall, the senior housing sector was hit hard by the pandemic, and it is among the slowest in the healthcare arena to recover, the experts noted. They added, however, that the recovery has begun, and they are optimistic about the outlook.