Silver Lining: Senior Housing Demand Signals Post-Pandemic Rebound, Sparks Need For New Inventory

With the COVID-19 pandemic in the rear-view mirror, demand for senior housing is picking up to the point that the market will soon need new inventory to keep up.

The senior housing occupancy rate increased 0.8 percentage points from 84.3% in the third quarter last year to 85.1% in the fourth quarter, according to data from NIC MAP Vision analyzed by the National Investment Center for Seniors Housing & Care (NIC).

The occupancy rate increased 7.3 percentage points from a pandemic low of 77.8% in the second quarter of 2021, bringing occupancy to less than two percentage points below the prepandemic level of 87.1% in the first quarter of 2020.

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Cities with the highest occupancy rates of the 31 NIC MAP Primary Markets included Boston at 90.7%; Baltimore at 88.6%; and Minneapolis at 88.1%. The cities with the lowest gains were Houston at 79.3%; Atlanta at 81.8%; and Las Vegas at 82.1%.

While occupancy and absorption are rising, higher borrowing costs and a challenging lending environment continue to weigh on new supply. In the primary markets, senior housing inventory in the fourth quarter was up by 0.4% or 2,920 units from the previous quarter. Inventory growth year over year was 1.4%, close to its lowest year-over-year increase since 2012.

"At this pace, we anticipate occupancy recovery to prepandemic levels in the second half of 2024," said Caroline Clapp, senior principal with NIC. "If this environment of robust absorption coupled with relatively moderate new inventory continues, owners and operators will need to determine when to jumpstart new construction to meet consumer demand."

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As the aging population grows, a phenomenon known as the silver tsunami, there is rising demand for diverse senior housing options. From assisted living facilities to independent living communities, there's a heightened emphasis on accessibility, healthcare support and recreational activities tailored to seniors.

The silver tsunami also is influencing policy discussions and healthcare planning, encouraging a proactive approach to ensure the well-being and comfort of the aging population in their later years.

The challenges and opportunities posed by this demographic shift are shaping the future of senior living and fostering innovation and a more comprehensive approach to elder care.

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