The NIC SHARK report series is designed to deliver actionable, data-informed insights and forward-looking perspectives to help senior housing capital providers, operators, and developers prepare for the future and better serve America’s older adults.
This second segment of the NIC SHARK series reviews senior housing lease-up trends over two key periods in the past decade and provides projections for the next three years. The analysis examines how these trends can shape senior housing lease-up strategies, highlighting the importance of the first year in setting the trajectory for success. These SHARK insights aim to drive a renewed growth cycle in the senior housing sector.
To learn more, download the second segment of the NIC SHARK Report.
Key Takeaways:
- Constant S-Shaped Lease-Up Curve: Lease-up trends over the past decade consistently followed a similar S-shaped curve, with occupancy starting low, accelerating in the second year, and stabilizing by the third and fourth years after opening. However, the steepness of the curve varied between periods.
- Importance of an Early Leasing Push: The first year is decisive in setting the trajectory for a property’s future performance. After the first year, all percentile curves tend to follow similar paths, with properties exhibiting stronger lease-up momentum in their initial year being better positioned to capitalize on accelerating demand in subsequent years. The first-year momentum makes a notable difference and impacts long-term stabilization outcomes and overall success.
- Renewed Growth Cycle with Faster Stabilization and Higher Lows: While properties opened in 2022 and 2023 experienced a relatively slower start due to some stabilized properties still recovering occupancy from the pandemic, they are projected to stabilize faster, with a steeper lease-up curve than in past cycles and new occupancy records. Half are on track to reach or exceed 97% occupancy by the fourth year, while another quarter is expected to reach between 87% and 97%, reflecting a higher low at 25th percentile (87%).
What does this mean for the senior housing sector? It means that a strategic focus on marketing, pricing, and outreach during the initial lease-up phase is vital. The first-year push isn’t just about filling units quickly; it’s about establishing a trajectory that sets the stage for long-term success. The data shows that properties with limited lease-up success in the first year often struggle to accelerate the pace of lease-ups in a meaningful way in the second year and beyond.
While market supply and demand dynamics play a role in shaping lease-up trends, the S-shaped curve and the importance of the first-year lease-up push remain constant in our industry. These dynamics offer actionable insights for adapting our strategies, whether we’re operating in a balanced market, navigating a period of supply surge, or preparing for anticipated population growth for older adults, increased demand, and moderate new supply.
However, it’s important to remember that it’s not just the market dynamics are changing – operators are actively shaping them. The collective efforts put into that first year have the potential to propel the industry forward, allowing senior housing operators to reach more potential residents. By leveraging the first-year lease-up push, marketing and sales professionals have the power to change the dynamics of the future and redefine success for senior housing.
We would love to hear your feedback! For questions or feedback, please contact analytics@nic.org
Stay tuned for upcoming segments of the NIC SHARK series.
Download the second segment of the NIC SHARK Report.