Q2 2021 Senior Housing Benchmark Report: Early Signs of Recovery in Midyear Data

As we hinted we would in June, we’ve published the first of our quarterly Senior Housing Benchmark Reports, which is available for download now.

The report includes data aggregated from SEC filings and supplemental disclosures representing over 2,100 senior living communities and eight public companies with significant senior housing exposure (five investors, three operators). We looked at the following metrics over the last four quarters:

  • Number of portfolio communities
  • Unit counts
  • Occupancy rates
  • RevPOR
  • NOI Margin

We’ve also put together some high-level analysis of what the numbers indicate now that we’re across the year’s halfway mark. As always, we’d love to hear your thoughts on either the report itself or this commentary.

Occupancy: Recovering from Pandemic Lows

When we looked at occupancy data in June, early indications suggested that occupancy rates were recovering from pandemic-era lows. That trend was borne out in Q2 reports: average occupancy at the communities we examined ticked up to 75.5 percent from a Q1 2021 low of 74.2 percent (see Figure 1).

Figure 1: Average senior living occupancy, Q3 2020 – Q2 2021

Figure 1: Average senior living occupancy, Q3 2020 – Q2 2021

Note that public market occupancy rates are consistently lower than what NIC reports.

One trend worth keeping an eye on as we track occupancy rates: some of the groups included in this report have been reporting spot occupancy monthly since the start of the pandemic, rather than waiting to publish numbers quarterly. In some cases, these monthly numbers are closer to what NIC is reporting. We’ll keep an eye on that and keep you posted on what we learn.

RevPOR: Increasing (on Average)

Average RevPOR across the groups we tracked is increasing, though not by much. The growth from Q3 2020 to Q2 2021 was 0.8 percent (see Figure 2). This trails inflation (5.4 percent CPI growth), the 11.4 percent increase in multifamily rental rates so far in 2021, and the 16.7 percent increase in single-family home values in the last year.


Figure 2: Average RevPOR, Q3 2020 – Q2 2021

This isn’t entirely unexpected. Senior housing was somewhat oversupplied going into COVID. The supply-heavy environment, plus last year’s forced halt on filling new units in much of the country, meant that communities had little room to raise rates, regardless of their actual costs.

Today’s supply-demand equation looks different.

New construction was stymied in the last year and a half by tightened lending standards, supply chain disruptions, and price increases for materials like lumber. This bodes well for existing communities, even when they’re forced to increase prices across the board.

Given all these factors, we expect continued rate increases through year end and into 2022, particularly when broader market conditions (inflation, minimum wage increases, worker shortages, the additional costs of PPE and other COVID protocols, etc.) are taken into consideration.

NOI Margin: Down but Recovering

Across the groups we examined, NOI margin is, on average, down from 2020, though it ticked upward in Q2 (see Figure 3).

Note that we did not sort this data by community acuity level or geography, both of which have a significant impact on NOI margin. Still, the average number fits the narrative told by the other data points in this report: senior housing was, in Q2, recovering from its pandemic-era bottom.

Figure 3: Average NOI margin is still down, but showing signs of recovery

Figure 3: Average NOI margin is still down, but showing signs of recovery

If you would like a more focused NOI margin comparison, please get in touch. We’d be happy to put together a comp report.

In the meantime, it’s important to note that, while Q2 saw an uptick in NOI margin, that may not be the start of a trend. The big X factor, of course, is the Delta variant, which drove a fivefold increase in COVID cases between late June and late July – i.e., in a time period not captured by Q2 data.

One example of how this might affect NOI margin: recent news stories indicate that even some agencies are now experiencing labor shortages, which could lead to serious squeezing in Q3.

We’re also seeing operators in multiple metro areas implement restrictions on in-person tours that, increasingly, resemble what we saw last summer.

Cautious Optimism in Senior Housing

It’s clear that senior housing was, in Q2, recovering from the blows it suffered during the first months of the pandemic. What’s less clear is how the Delta variant will affect the industry in the coming quarters.

As the Wall Street Journal reports, while we’re not yet hearing of major Delta outbreaks in senior living settings, we are seeing related problems: as more communities require staff to be vaccinated, for example, and some staff members refuse to vaccinate, existing worker shortages are intensifying.

Much depends on how the Delta variant affects the country in the coming months – which, as we learned last year, might look very different from one region to another.

For more insight, download the full benchmark report.

To look at these and other metrics for a sample of comp communities, get in touch. We’d love to put together a custom report.

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