Important Findings of the Seniors Housing Midyear Outlook

Marcus & MillichapMarcus & Millichap’s midyear 2021 report, The Outlook: Seniors Housing, provides important perspectives on the industry in light of the pandemic. The report examines data regarding occupancy rates, rent averages, and stock and investment outlooks.

Overall Findings

The report’s overall key findings provide a detailed assessment of the senior housing industry.

The senior industry has reduced occupancy. The pandemic and its early boutbreaks affecting senior care facilities resulted in an overall occupancy decline. While vaccination is increasing and outbreaks within senior housing communities have been reduced, those people who are trying to care for loved ones in their homes may become more willing to place loved ones in senior care facilities. Occupancy likely won’t recover fully this year, particularly because many senior care facilities are now competing to fill vacancies.

Increased regulation is increasingly challenging the industry. The report estimates that senior housing providers had sustained $22.5 billion in losses over the 12 months after the pandemic’s beginning. Increased operational expenses and insurance premiums were some of the causes behind this financial loss. Because of the labor shortage, it’s possible that operational costs like staffing could remain elevated.

The second half of 2021 could be critical for some facilities. Facilities that had assets in good standing are, for the most part, well-prepared to recover from the pandemic. Facilities that were already struggling before the pandemic might be offered for sale or redeveloped.

Demand for senior housing will increase long-term. The aging baby boomer generation, paired with longer life expectancies, means that demand for senior housing will increase. This will be particularly evident in the Sunbelt, which many retirees favor for its quality of life and climate. The senior populations in Phoenix and Las Vegas, alone, are predicted to grow by approximately 45% in the coming decade.

Operation-Specific Findings

The report also reveals key findings about specific operations within the senior care industry:

  • Independent living facilities experienced an occupancy rate decline to 77.7% in March. Areas like Los Angeles and New York City were particularly hard-hit. Rent averages increased by 1.3%, even though those facilities were coping with lower occupancy rates.
  • Assisted living facilities were some of the facilities that were most impacted during the pandemic. Occupancy declined to 75.5% in March, and rent increased by 1%. This report predicts that assisted living facilities will need multiple years to return to their pre-pandemic occupancy rates.
  • Memory care facilities felt the effects of the pandemic heavily, particularly because of their relatively repaid turnover. Occupancy fell to 73.2% in March, though occupancy remained higher in areas like the Gulf Coast region. Rent increased by 2.2%.
  • CCRCs and LPCs experienced less of an occupancy disruption when compared to other types of senior living facilities. During the first quarter of 2021, occupancy rates were at 84.3%. The average rent increased by 1.9%.

The Outlook for the Second Half of 2021

This report highlights the challenges that the senior care facility has faced, but it also provides encouraging details on how the industry has fared. Occupancy rates have declined, but an increasing demand thanks to the growing senior population should help facilities to recover and boost their occupancy rates.

Recovery will likely take years, and obstacles like increased regulations will continue to be challenges. However, facilities that already had strong assets pre-pandemic should be well-positioned to rebuild.

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