What’s Really Happening with Senior Living Occupancy Rates: Beyond the NIC Data

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One of the biggest questions right now for those invested in the senior living space is whether occupancy is on track for recovery post-COVID. The latest NIC (National Investment Center for Seniors Housing and Care) numbers suggest that it is, but as we all know, NIC numbers tell just part of the story.

The LivingPath team aggregated data from the filings of a number of REITs and operators, and we’re starting to track publicly reported occupancy numbers to complement our data on rates, concessions, and self-reported occupancy.

Our take as of now: Occupancy has bottomed out and is on the road to recovery. In this post, we offer takeaways from our investigation of occupancy data that represents 1,500 properties over the last six quarters.

Before we get into the details, though, a word about this data: We’re putting together a much more robust benchmark report on senior living occupancy, which we’ll update in July when Q2 numbers are available. (If you want an alert as soon as that drops, let us know.)

But because of what we’re seeing for April and May 2021, we wanted to get this out sooner.

Senior Living Occupancy Rates, Q419 – Q121

For this post, we looked at publicly reported occupancy rates from five sources:

  • Ventas (REIT)
  • Welltower Inc. (REIT)
  • Healthpeak Properties, Inc. (REIT)
  • Brookdale Senior Living (Operator)
  • NIC (Industry data aggregator)

In the last six quarters, these sources largely reported steady declines in senior living occupancy rates (see Figure 1). Before the pandemic, occupancy was generally in the high 80s; today, it’s mostly in the low 70s.

Figure 1: Occupancy Data

Figure 1: Five publicly reported occupancy rates 4Q19 – 1Q21

These numbers aren’t surprising:

  • Occupancy tends to dip in Q1, as community populations experience weather and seasonal-related illnesses, transfers, and deaths.
  • In Q1 2020, COVID-19 started spreading in the US; by quarter’s end, most states were in some form of lockdown, with visits to senior living communities tightly restricted. This, of course, throttled growth for the rest of the year.
  • While vaccine access accelerated in Q1 2021, seasonal forces and ongoing pandemic recovery continued to push occupancy rates down.

But we’re starting to see the light at the end of the tunnel.

While not all of the groups we tracked for this piece have reported monthly data through May 2021, the data we do have tells a compelling story (see Figure 2).

Figure 2: Three publicly reported occupancy rates, Feb. – May 2021

Figure 2: Three publicly reported occupancy rates, Feb. – May 2021*

Where data is available, what we’re seeing are slight upticks at the end of Q1 and the start of Q2. 

Further, NIC noted that occupancy rates were up 0.3 percent in May, expressing “cautious optimism” that we’re moving up from the bottom. And in an earnings call on May 5, Healthpeak CIO Scott Brinker noted that April occupancy had improved significantly.

There are other indicators, too, that occupancy rates will increase in the coming months. Let’s take a look at those.

Other Occupancy Indicators: What We Know, What We’re Hearing

Beyond the initial data points we’re seeing for Q2, we’re seeing four other key indicators that occupancy rates have bottomed out.

First, there are the simple demographic changes happening in the US right now (see Figure 3).

Figure 3: Projected percentage of US population aged 70+

Figure 3: Projected percentage of US population aged 70+ (Source)

As boomers continue to age, the percentage of the US population aged 70-plus will continue to rise. That rate of increase is also accelerating. As Welltower noted in its Q121 wrap-up, the combined annual growth rate (CAGR) of Americans aged 80 or older was 1.3 percent from 2007 to 2017. From 2018 through 2026, it’s projected to be 3.6 percent.

Demand for senior housing, in other words, is likely to increase.

Second, the Welltower report also pointed out that senior housing construction starts as a percentage of total inventory are at their lowest level since 2011, indicating that new supply is slowing (see Figure 4).

Figure 4: Senior housing construction starts vs. inventory

Figure 4: Senior housing construction starts vs. inventory, via Welltower

As for this calendar year, there’s a third reason to be optimistic. NIC has noted that the period from June through October tends to be the strongest for lead generation and occupancy growth in senior housing.

Finally, the end of pandemic-related supplemental unemployment benefits could help solve worker shortages that are preventing communities from, for example, opening new wings to residents.

Supplemental federal unemployment benefits have been extended until September 6, but 25 states have opted out of the extension. The first among them stopped supplemental benefits on June 12.

The shift may make returning to in-person work more attractive for workers who would have otherwise not been financially incentivized to do so, including those whom senior living communities rely on to operate.

Besides these hard data points, we’re also hearing in our own conversations with communities and operators that inquiries and unit tours are on the rise.

Of course, as with all senior housing data, there are variations by geography and care type. If you’d like to be among the first to get access to our full Q2 occupancy benchmark report, let us know. We’ll be sure to send you the full report as soon as it’s live.

A Look at Property Count

One other data point we thought was worth sharing in this discussion of occupancy is property count for the investors whose occupancy rates we investigated (see Figure 5).

Figure 5: SHOP Property counts for three REITs, Q419 – Q121

Figure 5: SHOP Property counts for three REITs, Q419 – Q121

The numbers here don’t change the headline above, but they add some nuance.

Broadly, even though occupancy is ticking up, the major players don’t agree about the future prospects in senior living.

Healthpeak, for example, is in the midst of a strategic move out of rental senior housing and into CCRCs. Its property count maxed out at 141 in Q1 2020 and dropped to 49 in Q1 2021 – a decline of more than 65 percent.

On the other end of the spectrum, Ventas and Welltower are both bullish.

Recent reporting from Senior Housing News quoted Ventas CEO Debra Cafaro as noting that Ventas will be putting senior housing at the forefront of its investments.

Per the article, Cafaro said, “We really are going to prioritize senior housing. We believe in the [COVID] recovery story and are prepared to put our money where our mouth is.”

As of this writing, however, Ventas’ property count hasn’t changed much in the last six quarters (a decline of less than two percent).

As for Welltower, CEO Shankh Mitra is on the record noting that success in senior housing investing requires “an operating platform, … the data, [and] … the patience to do small transactions.” If you can do that, he notes, you can make money.

Considering Welltower increased its SHOP holdings from 409 properties pre-pandemic to 526 in Q1 2021 – 29 percent – and will be acquiring the 86 properties currently owned and managed by Holiday Retirement, it’s clear he believes his organization has all those necessary ingredients.

Mitra has also called attention to the demographic trends we highlighted above: aging boomers combined with falling property starts mean that demand is growing at a time when supply is tightening.

Still, these numbers don’t give the full story, in part because REITs count the properties they own in different ways.

Sign Up for the Full Occupancy Benchmark

As I mentioned at the start of this post, these numbers aren’t exhaustive. If you’d like us to notify you when the full Q2 2021 occupancy benchmark report is live, send us a quick note. We’ll put you on the list to receive the full report as soon as we publish it.

 

*Sources:

https://welltower.com/investors/press-release-details/?id=24156

https://www.prnewswire.com/news-releases/brookdale-reports-may-2021-occupancy-301308346.html

https://seniorhousingnews.com/2021/05/07/ventas-march-april-senior-housing-move-ins-at-highest-levels-since-june-2019/

https://www.businesswire.com/news/home/20210507005287/en/%C2%A0Ventas-Reports-2021-First-Quarter-Results 

https://seniorhousingnews.com/2021/06/09/ventas-ceo-were-surprised-to-see-senior-housing-demand-return-so-soon/

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