Data from the recently released 1Q2023 NIC MAP Vision Actual Rates Report showed growth for asking rates was at near-record highs on a year-over-year basis for all three care segments (independent living, assisted living, and memory care) for the data contributors to this data collection. In the recently released report, monthly data of actual rates and leasing velocity are presented through March 2023, including data on rate discounting and move-in/move-out trends. Key takeaways from the report, specifically from the Segment Type report, are presented below. Care segments refer to the levels of care and services provided to a resident living in an assisted living, memory care or independent living unit. 

Key Takeaways

• The year-over-year pace of growth in all rates for all care segments reached near record highs.

• • • At 9.6% in March 2023, year-over-year asking rate growth for the independent living care segment was the strongest pace of the three rate categories. Separately, in-place rates were up by 7.5% from year-earlier levels, and initial or move-in rates were up by 8.2%. These were nearly the highest rates of growth in the time series for these rates, except for January 2022, when many rates rose with lease renewals and annual adjustments.
    • For assisted living, growth in initial rates was a very high 11.5% in February 2023, the largest year-over-year increase in the time series. March 2023 gains were also high at 8.7% from year-earlier levels. Asking rate growth topped 9.1% in March 2023.
    • Of the three tracked memory care rate categories (in-place, asking and initial/move-in), the fastest pace of growth occurred in asking rates, which were up by 9.1% from year-earlier levels in March 2023. In-place rates were up by 9.0% from year-earlier levels in March 2023 and initial rates were up by 7.4%. 

• Discounts are highest in the independent living care segment.
  • • Discounts between asking rates and move-in rates (initial rates) within the independent living segment have hovered between 1.0 months and 1.3 months on an annualized basis since February 2022 and were the equivalent of $383 (1.2 months) in March 2023. Compared with asking rates, in-place rates had a 0.6 month annualized equivalent discount. This is higher than the historic average of 0.2 of a month.

• The pace of move-ins generally strengthened in the early months of 2023 for assisted living, and memory care.
  • • Move-ins for assisted living segments averaged 3.6% of inventory in March 2023, among the strongest months since September 2021. At its lowest point in the early months of the pandemic, move-ins averaged 1.1% of inventory in April 2020 before accelerating to a high rate of 3.9% in June 2021.  

Additional key takeaways are available to NIC MAP Vision subscribers in the full report.

NIC MAP Vision continues to work to onboard new data contributors and is dedicated to reporting more metros. It is only with the support of Actual Rates data contributors and officially certified Actual Rates software partners that expanded metro-level reporting is now available. For more information on which metropolitan markets are now available to NIC MAP Vision subscribers, please contact a product expert at NIC MAP Vision today. 

About the Report

The NIC MAP Vision Seniors Housing Actual Rates Report provides aggregate national data from approximately 300,000 units within more than 2,700 properties across the U.S. operated by 35 to 40 senior housing providers. The operators included in the current sample tend to be larger, professionally managed, and investment-grade operators as we currently require participating operators to manage 5 or more properties. Note that this monthly time series is comprised of end-of-month data for each respective month, and that the set of properties included in each month’s data set is subject to change. The sample is not “same store,” and occupancy is inclusive of newly opened properties in lease-up. NIC MAP Vision is working on including same-store rate metrics in a future release.

Interested in Participating?

The Actual Rates Data Initiative is an effort to expand senior housing data and we are looking for operators who have five or more properties to participate. NIC MAP Vision has expertise in extracting data from industry leading software systems, such as Yardi, PointClickCare, Alis, MatrixCare, Glennis Solutions, Vitals, Move-N, and Eldermark and can facilitate the process for you. 

Operators contributing data to the actual rates report receive a complimentary report which allows them to compare their own data against national, and metropolitan market benchmarks.

In addition to receiving a complimentary report, your organization benefits through:

• More informed benchmarking, strategic planning, and day-to-day business operations,
• Increased transparency, aligning with other commercial real estate assets in terms of data availability,
• Saved time, Actual Rates data is collected electronically directly from operators’ corporate offices, removing the need for telephone calls to individual properties, and
• Enhanced investment and efficiency across the sector.

Visit NIC Map Vision’s website for more information.

Mental health is part of physical health. If that wasn’t always obvious, it became painfully apparent during the pandemic. Isolation and loneliness can trigger anxiety and depression.  

Senior living residents can be especially vulnerable. Many residents move in with chronic health conditions, such as congestive heart failure, which can be addressed. Less recognized is the fact that mental health issues are also common among the older population. 

But that’s changing. Awareness is growing among owners and operators that residents’ mental health issues need to be addressed. “Mental health challenges are being talked about more routinely these days,” said NIC Senior Principal Ryan Brooks. “That’s a good thing.” 

Brooks led a panel of experts at the 2023 NIC Spring Conference in a discussion titled, “Opportunities in Behavioral Health.”  

The speakers addressed how owners and operators are integrating mental health programs into their offerings. The panel also discussed how some senior living providers are exploring whether underutilized properties could be recycled as behavioral health centers.  

By the Numbers 

A recent study by NORC, the research arm at the University of Chicago, conducted through a grant from NIC, found that more than half of senior housing residents have at least one mental or behavioral health diagnosis. Four out of five nursing home residents have a behavioral health diagnosis.  

AARP found that 35% of older adults are lonely and prone to depression, leading to a higher risk of problems with alcohol and substance abuse. Twenty percent of seniors already suffer from some form of substance abuse, according to the Substance Abuse and Mental Health Services Administration.  

“Positive health outcomes are not just nice to have,” said Brooks. Poor mental health can impact the resident’s ability to engage with their provider, keep appointments and take their medications.  

Compromised mental health also hinders social engagement, according to panelist Hilary Forman, chief clinical strategies officer at HealthPro Heritage, an integrated health and wellness company that helps communities implement therapy, wellness and life enrichment programs. “We should be able to openly talk about this,” she said.  

Beyond Awareness 

A shift is needed from simple awareness of the problem to the establishment of clearly defined protocols and services, said panelist Richard Feldman, co-founder & managing principal, Behavioral Health Advisory Group. He added that the growth of telehealth is a step in the right direction, especially to supplement the shortage of mental health specialists.  

Brooks asked about the role of the staff at the community. The first step is to train the staff about the importance of mental health. They should be aware of any diagnoses in the resident’s electronic medical record.  

The staff should look for red flags. How does the resident behave? Is the resident attending programming? Going to dinner? “Look for simple clues that indicate isolation or a change in behavior,” said Forman. Also, big life events such as the recent loss of a spouse followed by a move to a community often puts a new resident at increased risk. 

As a start, Feldman conducts an educational needs assessment with the entire staff. That forms the basis of protocols, such as when the CNAs should report a behavior or incident to a nurse who might need to report that to a physician. The goal is to integrate a behavioral health framework into resident programming and staff training. “I think you begin there,” he said.  

The Real Estate Play 

Some senior housing owners and operators are expanding their portfolios with dedicated mental health facilities. Substance abuse treatment centers and short-term psychiatric hospitals represent an opportunity for the industry, according to panelist Talya Nevo-Hacohen, chief investment officer at Sabra Health Care REIT. She said the trend is being driven primarily by insurance companies willing to pay for treatment.  

Sabra has had some success recycling older, less financially viable skilled nursing and senior housing assets into dedicated behavioral health facilities. Yields range from about 8-9%, on par with skilled nursing cap rates.  

“You really have to vet the opportunity,” said Feldman. Is there a market for acute inpatient psychiatry services? Will all the services offered be reimbursed by payers? Medicare has a strong base rate for mental health treatment. But, he warned, “Do your homework.”  

Nevo-Hacohen added that the availability of capital is limited in the behavioral space. Few operators have a solid track record. Debt is scarce. Equity investors are focused on building platforms to roll up properties. “It’s a very fragmented space,” said Nevo-Hacohen, who added that Sabra is helping to fill the capital gap.   

On the services side, hospitals are looking for alternative providers with mental health programs. Value-based care insurers recognize the need to house patients in the right level of care. Forman thinks this could be an opportunity for senior living providers if they have the right programming in place.    

Senior housing operators don’t have to hire mental health professionals, the panelists agreed. “Think about how to affiliate with providers who can bring those services in,” said Feldman. Program discussions should include the entire treatment team, both internal and external. “Make sure everyone is on the same page,” said Forman.  

Bringing the discussion full circle, Feldman emphasized the importance of integrating physical and mental health care. “Psychiatry is a medical issue,” he said. “It’s not distinct from treating heart failure, obesity, diabetes, or anything else.”

NIC MAP Vision clients, with access to NIC MAP^® data, attended a webinar in mid-April on key senior housing data trends during the first quarter of 2023. Findings were presented by NIC Analytics research team members. Key takeaways included the following: 

Takeaway #1: Senior Housing Occupancy Rose 0.3 percentage points in 1Q 2023 

The occupancy rate for senior housing—where senior housing is defined as the combination of the majority independent living and assisted living property types—rose 0.3 percentage points to 83.2% from the fourth quarter of 2022 to the first quarter of 2023 for the 31 NIC MAP Primary Markets. This marked the seventh consecutive quarter of occupancy increases.  

At 83.2%, occupancy was 5.4 percentage points above its pandemic-related low of 77.8% recorded in the second quarter of 2021 and was 4.0 percentage points below its pre-pandemic level of 87.2% of the first quarter of 2020.   

Demand as measured by the change in occupied inventory or net absorption moderated in the first quarter, increasing by 3,927 units in the Primary Markets after having increased by more than 8,000 units in the prior three quarters, but it was still well above the historical quarterly average of 2,251 units. The robust positive demand that has occurred over the past eight quarters has helped occupancy to improve.   

Takeaway #2: Occupancy Recovery Continues, Led by Assisted Living 

The chart below shows the pace of recovery to date for each property type and the gap remaining to reach pre-pandemic 1Q 2020 occupancy levels. 

Independent living occupancy was up 3.5 percentage points from its 2021 trough with 4.5 percentage points remaining to reach its pre-pandemic level.  

Assisted living occupancy was up 7.3 percentage points from its 2021 trough with 3.3 percentage points remaining to reach its pre-pandemic level. 

Nursing home occupancy was also up 7.3 percentage points from its 2021 trough with 5.3 percentage points remaining to reach its pre-pandemic level.  

Takeaway #3: Annual Inventory Growth Rate Has Slowed Significantly for Assisted Living 

Annual inventory growth in the first quarter for independent living stood at 1.7%, near its pre-pandemic average of 1.6%. 

Assisted living inventory grew by a similar amount in the first quarter at 1.6%, but this growth was half the typical growth recorded for assisted living before the onset of the pandemic, which was 3.2% annually. 

This slower inventory growth stems from the slowdown in construction starts that we experienced during the height of the pandemic, a trend that occurred for both independent living and assisted living. 

Takeaway #4: Occupancy Rate Improvements in 1Q 2023 Were Largest for Single Properties, Small Chains, and Large Chains 

The greatest occupancy rate improvements in the first quarter were for single properties (up 0.6%) and for small chains (up 0.6%) with 2 to 4 properties, followed by large chains (up 0.5%) with 10 to 24 properties. 

Single properties continued to have the highest occupancy rate at 86.1% with only 3.1 percentage points of occupancy left to recover to reach its pre-pandemic level. 

Meanwhile, medium chains of 5 to 9 properties and very large chains of 25 or more properties saw no change in their average occupancy rates from the fourth quarter of 2022 to the first quarter of 2023.  

Despite the unchanged occupancy rate, the smallest gap to achieve pre-pandemic occupancy was for the medium chains with 3.0 percentage points remaining to recover. 

The very large chains still had the weakest occupancy rate at 79.5%, with another 5.2 percentage points still to be recovered. 

Takeaway #5: Construction Activity Still Slow in Most Markets 

The heat map below shows which markets were experiencing the most construction activity over time.  

For perspective, for senior housing overall, construction totaled 5.1% of inventory for the Primary Markets in the first quarter of 2023, down from a peak of 7.8% in 2019. 

The blue tones indicate that construction activity is relatively “cool” in most markets during recent quarters. 

The markets that are shaded brighter red had the most construction as a percent of inventory in the first quarter. This group was led by San Jose at 13%, followed by Miami at 11%, and Denver, Portland, and Washington, DC all at 10%. 

At the other end of the spectrum were markets where there was very little construction underway in the first quarter; this includes Pittsburgh at 0%, San Antonio at 1%, and Cincinnati, and Kansas City at 2%. 

This article also appeared in the May edition of the NIC Insider newsletter.

NIC recently relaunched its popular Leadership Huddle webinar series to address today’s evolving market conditions. In the first Leadership Huddle webinar of 2023, held on May 2, NIC Chief Economist, Beth Mace, presented the NIC Blue Book, addressing current trends, challenges, and opportunities in the senior housing industry. Mace provided insights on the broader economy, inflation, Fed policy, interest rates, the potential for a recession in the next twelve months, and the current job market.  

The Federal Reserve’s response to addressing the highest inflation rates in 40 years has been to push interest rates up quickly and steeply to avoid embedding inflation into the expectations of consumers and businesses. Mace pointed out the impact of the rising interest rates on GDP growth, which saw a significant deceleration in the first quarter of 2023. The labor market, however, has remained strong, with the unemployment rate hovering between 3.4% to 3.6% for the past several months. Nonetheless, cracks in the job market are starting to emerge, with job openings declining, quit rates dropping, and layoffs increasing. 

Mace noted evidence of improvements in the senior housing job market, with the use of temporary agency workers starting to decline, and the level of jobs in assisted living now above their pre-pandemic peak. However, jobs in skilled nursing are still well below where they were pre-pandemic, and the number of workers in skilled nursing has been declining for quite some time. 

Join the Complimentary NIC Leadership Huddle Webinar

The New Reality: 

A Conversation about Current Market Trends Affecting Senior Housing

May 23, 2023, 2:00 PM ET

While senior housing occupancy rates are still lower than pre-pandemic levels due to new supply coming into the market, the number of actual occupied units for senior housing is as high as it has ever been. The occupancy rate is still four percentage points below its pre-pandemic level, but net absorption has more than made up for the loss of occupied units experienced during the pandemic. Growth in wage rates is putting upward pressure on operators’ expenses, but positive revenue growth in asking rents for assisted living and independent living is providing some relief. To maintain a stable labor force, operators are focusing more on culture, loyalty, and education, among other strategies.  

The lending environment in the commercial real estate industry is becoming increasingly difficult as interest rates rise, bank borrowers face greater scrutiny, and banks address greater regulatory pressure. Construction financing is very difficult as well, and development has also been limited due to supply chain disruptions and a shortage of skilled labor. She noted that new development is likely to be limited in the near future, but that there could be opportunities for redevelopment and repurposing of existing properties. 

In addition, there is uncertainty around the cost and availability of agency debt, which has historically been a significant source of financing for the industry. Transaction volumes have been low in recent months, with many businesses waiting on the sidelines to see where values are going to end up.  

Despite today’s challenges, there is reason to be optimistic about the long-term prospects for the senior housing industry. Market fundamentals are improving, and demographics are favorable. Mace noted that the value proposition of senior housing has never been better, with more people focusing on wellness and being in an environment that supports wellbeing. She urged operators and investors to focus on the fundamentals of the market and to be patient in their approach. 

A replay of the May 2 Leadership Huddle webinar is available here.  

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Join us for the next Leadership Huddle webinar on Tuesday, May 23, at 2:00 PM as NIC Chief Economist, Beth Mace, leads a discussion on current market conditions with Aron Will, Vice Chairman and Co-Head of National Senior Housing at CBRE Capital Markets, Kris Woolley, Founder and CEO at Avista Senior Living, and Steve Blazejewski, Senior Portfolio Manager and Managing Director at PGIM Real Estate. Learn from these experts who work in the senior housing markets every day. Registration is complimentary. 

According to intra-quarterly NIC MAP^® data, released by NIC MAP Vision, the senior housing all-occupancy rate for the NIC MAP Primary Markets increased to 83.5% in the April 2023 reporting period, up 0.3 percentage points (pps) from the March 2023 reporting period on three-month rolling basis. From its time series low of 77.8% in June 2021, occupancy increased by 5.7pps, as evident in the exhibit below, with 20 of the 22 reporting periods showing positive gains (from June 2021 to April 2023).  

Strong demand suggests a positive outlook for senior housing. According to NIC’s Executive Survey Insights (ESI) for the month of April 2023, this positive trend is supported, with one-half of responding operators (52%) reporting an acceleration in the pace of move-ins, the highest share of operators reporting an acceleration since April 2022 when 54% of organizations reported the pace of move-ins to be accelerating. 

Occupancy Recovery by Majority Property Type. At 85.3%, the all-occupancy rate for majority independent living (IL) properties for the NIC MAP Primary Markets edged up 0.1pps from the March 2023 reporting period on a three-month rolling basis but remained 4.4pps below the March 2020 level. For majority assisted living properties (AL), the all-occupancy rate for the NIC MAP Primary Markets was up 0.5pps to 81.7% from March 2023 and is now 2.8pps below March 2020 levels. Despite the faster improvement in assisted living, the overall occupancy rate is still lower than that of independent living. 

From its pandemic related low (June 2021), the all-occupancy for majority assisted living increased by 7.8pps, 4.2pps more than for majority independent living (up 3.6pps since June 2021). Occupancy for assisted living continued to recover relatively fast compared with independent living despite the relatively large inventory growth since the onset of the pandemic. However, in the past 12 months, assisted living inventory was less than that of independent living. The inventory of independent living and assisted living for the NIC MAP Primary Markets increased by 1.7% and 1.5%, respectively, from year-earlier levels in the April 2023 reporting period.  

Occupancy Recovery Across Select Metropolitan Markets. In 11 of the 31 NIC MAP Primary Markets, assisted living occupancy rates have either returned to pre-pandemic March 2020 levels or exceeded them, with some markets being within less than 1pps from returning to their March 2020 levels. Notable examples include Dallas, where occupancy stands at 83.1%, surpassing the March 2020 level by 2.9pps, and Kansas City, with occupancy at 85.4%, exceeding the March 2020 level by 1.9pps. Other markets such as Phoenix, Orlando, Denver, Detroit, Tampa, Cleveland, Atlanta, San Antonio, and Portland have also demonstrated notable recovery in assisted living occupancy rates. Additionally, 20 of the 31 Primary Markets saw assisted living occupancy rates above 80% in April 2023. 

For independent living, out of the 31 NIC MAP Primary Markets, only four have returned/exceeded March 2020 occupancy levels, or are within less than 1pps of reaching that benchmark. Some of these markets include San Antonio (87.0%, 1.8pps above March 2020 level), and Pittsburgh (89.7%, 0.6pps above March 2020 level). While the majority of the 31 NIC Primary Markets still have independent living occupancy rates differing by more than 1pps, it is important to note that all markets currently maintain occupancy rates above 80% (ranging from Houston at 80.1% to Boston 93.4%). This highlights the overall resilience and strength of independent living, even amidst varying levels of recovery.  

Keep track of the most timely comprehensive review of the sector’s market fundamentals and trends. The NIC Intra-Quarterly Snapshot monthly publication, available for complimentary download on our website, continues to provide a powerful and closely watched means to stay ahead of industry trends, even as senior housing markets sustain a fast pace of evolution and adaptation, amidst an apparent recovery.   

The May 2023 Intra-Quarterly Snapshot report will be released on our website on Thursday, June 8, 2023, at 4:30pm.  

Interested in learning more about NIC MAP Intra-Quarterly data? To learn more about NIC MAP Vision data, schedule a meeting with a product expert today.