Senior housing occupancy declined 2.6 percentage points in the third quarter, falling from 84.7 to 82.1 percent. That is among findings of new data from NIC MAP Data Service provided by the National Investment Center for Seniors Housing & Care (NIC). Last week, NIC’s Lana Peck discussed senior housing fundamentals. Quarter three was the second consecutive quarter in which occupancy dropped more than 2.5 percentage points and signals the senior housing sector is experiencing its biggest occupancy falloff on record.
Independent living facilities have witnessed a substantial inventory increase, the largest since early 2009. That is reflective of the vibrant lending and development environment two years ago that spawned the newly completed properties now entering the market. By contrast, Q3 2020 construction starts continued to be comparatively limited, a sign of capital markets that have tightened considerably since late 2018 and early 2019.
“Since the pandemic began, we’ve seen significant cooperation between investors and operators,” Beth Burnham Mace, NIC chief economist, told Multi-Housing News. “Investors understand operators are working in a very challenging environment. And this report demonstrates those challenges.”
Senior housing occupancy levels differ widely between metro areas and properties. The data revealed San Jose, San Francisco and Portland, at 89.9, 87.0 and 85.5 percent respectively, had the highest rates of occupancy of 31 metropolitan markets that comprise NIC MAP’s Primary Markets. Recording the lowest were Houston, Atlanta and Phoenix, at 75.9, 77.4 and 78.6 percent respectively.
Disparities also exist between metros in how far occupancy has fallen during the pandemic. An 8.6 percent drop-off to 80.6 percent in the Sacramento area, for instance, far outpaced the 2.2 percentage point trim to 84.7 percent in the Washington, D.C. area.
Some 34 percent of senior housing communities had occupancy levels above 90 percent in the third quarter, while 36 percent reported occupancies below 80 percent. This “barbell effect” means operators with higher occupancy rates are likely to be able to absorb the impact of COVID-19, while those with lower occupancy face steeper hurdles.
“Some of those properties less than 80 percent occupied were at the beginning of lease up at the start of the pandemic, so there was that disadvantage,” Mace said. “Timing is everything in real estate.”
Both assisted living and independent living witnessed the steepest occupancy drops to date. Assisted living dropped 2.9 percentage points to 79.1, while independent living fell 2.4 percentage points to 84.9 percent.