The economic shocks of the COVID-19 pandemic have worn off, affirming the “durability of demand” for needs-based senior living, according to a new report from NIC MAP Vision.
COVID shock led to move-in restrictions, and lack of a vaccine caused absorption and penetration rates to crash in the first quarter of 2020, the report noted. But the sector saw a rapid rebound, with penetration rates and total absorption recovering within five quarters of the full rollout of the COVID-19 vaccine through the first quarter of 2022, according to the newly released data pulled from the previously published Senior Housing Market Outlook Report.
The latest key takeaway report highlights specific statistics on market fundamentals from the original publication, focusing on the recovery of senior living fundamentals: absorption, occupancy, rate growth and margins. That recovery, according to the report, highlights the needs-based dynamics of the sector, which NIC MAP Vision said is “rich with opportunity.”
Despite the effects of the pandemic on senior living supply growth, rising interest rates, increased regulation and reduced lending activity across most sectors, the fundamentals of senior living (independent living and assisted living) continue to improve, helping the sector to recover to its pre-pandemic performance, according to the report. And public markets have recognized the opportunity in the sector, the authors said.
“The combination of solid operating fundamentals, combed with burgeoning growth, create a wellspring of opportunity in the industry,” according to the report.
To prove its point, NIC MAP Vision said the data show:
- Staffing levels and occupancy have recovered to close to pre-pandemic levels as the labor markets normalize. Occupancy and employment levels were within 1% to 2% of pre-COVID levels in the first quarter, indicating a strong recovery.
- Rents are increasing, and operating expenses and inflation are moderating, leading to expanding profit margins.
- Aggregate industry staffing levels have rebounded and are 5% above pre-pandemic levels, alleviating wage and agency staffing pressures for providers.
- The 80-plus occupied unit penetration rate — occupied senior housing units in the 80-plus population in NIC MAP’s primary and secondary markets — returned to its all-time high in late 2022, indicating a full recovery from the pandemic.
- Major public operating real estate investment trusts are reporting moderating expense growth and margin expansion, driven by growing occupancy and favorable rent/expense growth trends.
Senior living returns were less volatile and declined 6.7% over the course of two quarters compared with returns on apartments, which declined 24% over seven quarters, according to the report, which cited data from Levin’s Commercial Investment Real Estate Magazine.
