Increasing demand, combined with notable pandemic recovery, make memory care an attractive prospect for investors, but senior housing stakeholders looking to capitalize on the trend need to understand supply and demand trends, including workforce supply and availability, according to a NIC Analytics analysis.
In a blog post, Omar Zahraoui, principal at the National Investment Center for Seniors Housing & Care, delved into the memory care segment to provide an overview of supply and demand dynamics, occupancy rates across property types, and how the segment compares in these ways with independent living and assisted living.
Demand outpacing other segments
Estimating that 8.2 million Americans will be living with Alzheimer’s disease or other forms of dementia in 2030, Zahraoui noted that demand for memory care is outpacing other senior living and care segments, according to NIC Analytics data.
Supply dynamics for memory care segments have remained strong and elevated since the first quarter of 2020 compared with those for independent living and assisted living. As of the first quarter of 2020, approximately one in three existing memory care units had been developed over the span of the previous five years.
Between the first quarter of 2015 and the first quarter of 2020, inventory for memory care segments in NIC’s 99 primary and secondary markets increased by more than 46%, averaging 1.9% of growth on a quarterly basis. Over the same five-year period, independent living inventory grew by 10.9% and assisted living inventory grew by 18%, Zahraoui said.
Between the first quarter of 2020 and the first quarter of 2023, memory care inventory grew by 10.7%, averaging 0.9% quarterly growth. This compared with inventory growth of 6.5% and 5.6% for independent living and assisted living, respectively, in the same period, averaging half of the quarter-over-quarter growth of memory care, he noted.
Memory care experienced notable demand growth ahead of the pandemic, with occupied stock increasing by 40.2% in the five years before the pandemic, exceeding demand for independent living (9.7%) and assisted living (12.8%) over the same time period.
During the pandemic’s peak, occupied stock across memory care fell by 6.8% from the first quarter of 2020 to the first quarter of 2021. That decline was larger than it was for independent living, which fell by 5.1%, but not as large as for assisted living, for which occupied stock fell by 9.8%.
Since then, and after two years of consistent demand momentum, Zahraoui said, occupied stock across memory care has fully recovered, increasing by 17.2% from pandemic lows. Memory care was the first long-term care segment that exceeded pre-pandemic occupied stock levels and is now up 9.3% over the first quarter of 2020. In comparison, occupied stock levels for independent living and assisted living are 2% and 1.4%, respectively, above first quarter 2020 levels.
Occupancy recovery surpasses other segments
The decline in memory care occupancy after the onset of the pandemic was less than that experienced in assisted living but more than that seen in independent living.
Memory care occupancy fell by 9.3 percentage points after the onset of the pandemic. By comparison, during the same time period — from the first quarter of 2020 to the first quarter of 2021 — assisted living saw a 10.5 percentage point decline and independent living occupancy declined by 6.6 percentage points.
From its first quarter 2021 low, however, occupancy for memory care recovered relatively quickly, gaining 8.2 percentage points in the first quarter of 2023, leaving it only 1.1 percentage points below pre-pandemic levels.
Occupancy for independent living has recovered 3 percentage points, and assisted living has recovered 7.1 percentage points from their pandemic lows, but both segments still have room to grow. Independent living remains 3.8 percentage points below pre-pandemic occupancy levels, whereas assisted living is down 3.4 percentage points.
Zahraoui also wrote about occupancy across property types, noting that trends are shifting from freestanding memory care properties more to units within continuing care retirement / life plan communities.
