Senior Housing Market Update: Q4 2024
In the near term, occupancy is set to continue to increase as demand further outpaces new supply.
Senior Housing occupancy improved for the 14th consecutive quarter to 87.2 percent in the fourth quarter of 2024. Ten of the last fourteen quarters have seen the highest volumes of absorption in the history of NIC MAP data collection. This means more seniors than ever are moving into senior housing.
The fourth quarter marks the 14th consecutive quarter that absorption has exceeded inventory growth which has led to continued occupancy growth across the sector. Absorption increased by 5 percent compared to the previous quarter and was up 45 percent from the average 4th quarter absorption pre-COVID. Absorption is expected to remain strong, as demand from the 80+ population is expected to expand over the next two decades. In the near term, occupancy will continue to increase as demand is expected to continue to outpace new supply.
The pace of new inventory growth continued its sluggish growth, adding approximately 2,500 senior housing units. 2024 finished with nearly 8,800 units added, up 18 percent from the previous year, but down 23 percent compared to 2022. However, not a single quarter over the last two years has exceeded over 3,000 operational units added in NIC MAP Primary markets.
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More concerning, the number of senior housing units under construction in the fourth quarter is down 24 percent compared to the fourth quarter of last year. Given the overall trend in new construction, the expectation is for units under construction to continue to decline in the coming quarters. Construction represented 3.1 percent of existing inventory in the fourth quarter, down from 4.1 percent a year prior. Historic inventory growth, both short and long term, is required to keep pace with current and anticipated demand.
While senior housing occupancy is increasing, the reported annual rent change, measured against the previous year, continues to decelerate from its all-time peak high in the middle of 2023. The average asking rent for senior housing in the fourth quarter exceeded $5,420, the highest average rent in history. This is a 4.1 percent increase compared to the previous year. After nine straight quarters of rate acceleration, we have now seen six consecutive quarters of deceleration from a 6.1 percent peak in the second quarter of 2023 to 4.1 percent this quarter. While year-over-year rent growth has slowed, it still represents a pace well-above historic norms.
The collective impact of these trends points towards a continued expansion of senior housing market fundamentals. The combination of historic high demand growth, historically low supply growth, and rent growth slightly outpacing inflation positions senior housing to be one of the most profitable real estate asset classes in the future, according to NIC MAP data in its Senior Housing Market Outlook.
Commentary provided by Arick Morton, NIC MAP CEO
—Posted on January 29, 2024
