Senior Housing Occupancy Up For 7th Straight Quarter

Senior living was hot before the COVID-19 pandemic — many believed additional investment in the sector was necessary. 

But as the deadly virus swept through senior care facilities nationwide, occupancy plunged as deaths in the facilities mounted, and they struggled to admit new residents as the Centers for Disease Control and Prevention (CDC) guidelines warned of the dangers of communal living. Before the pandemic, the occupancy of the average senior living facility was 87.2%, according to a Grant Thornton report. It reached a pandemic low of 78% before starting to recover in the fourth quarter of 2021.

But now, the demand for senior living units is outpacing the decelerating new supply and fueling occupancy gains, according to a report from the National Investment Center for Seniors Housing & Care (NIC).

The senior housing occupancy rate increased 0.3 percentage points from 82.9% in the fourth quarter of 2022 to 83.2% in the first quarter of 2023 — the seventh consecutive quarterly occupancy rate increase, according to the report. The occupancy rate increased 5.4 percentage points from a pandemic low of 77.8% in the second quarter of 2021 but remained 4 percentage points below the pre-pandemic high of 87.2% in the first quarter of 2020.

“The continued increase in senior housing occupancy rates was driven by positive net absorption coupled with limited new supply,” said Chuck Harry, NIC’s chief operating officer. “The likely ongoing recovery in senior housing fundamentals is further supported by the first quarter’s lowest rate of senior housing construction since 2014. And construction is expected to remain suppressed during this period of significantly higher financing costs.”

Senior housing units under construction relative to the total existing senior housing inventory continued to trend lower in the first quarter to 5.1%, down 2.7 percentage points from its historical peak of 7.8% in the fourth quarter of 2019. It’s the lowest rate of construction since 2014 and is largely a result of higher interest rates and a slowdown in financing.

“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,” said Caroline Clapp, NIC’s senior principal of research and analytics. “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.”

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