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.  

— 

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. 

NIC Analytics released the 4Q 2022 NIC Lending Trends Report today. The quarterly report, available complimentary to NIC constituents, includes data trends over six years for senior housing and nursing care construction loans, mini-perm/bridge loans, and permanent loans, from 3Q 2016 through 4Q 2022. 

Takeaways from the 4Q22 NIC Lending Trends Report 

After a sharp decline in the third quarter 2022, the issuance of mini-perm/bridge debt for senior housing bounced back in fourth quarter 2022 to levels seen earlier in the year. The use of mini-perms and bridge debt reflects difficulties in sourcing permanent debt, given the challenges in the overall capital markets and lending environment. Specifically, the jump in mini-perm/bridge loans for senior housing suggests that some borrowers are opting for mini-perm loans over permanent loans for some deals, likely due to elevated interest rates, inflation, and moderately low occupancy rates in general. 

Closed new permanent loan volumes increased to levels seen earlier in 2022 but remained well below those levels seen in 2018 and 2019. For the sample of lenders in the Lending Trends Report, new permanent loans closed for nursing care was 38% less than that of senior housing.  

Separately, senior housing new construction loan closings inched up slightly in the fourth quarter of 2022 but were generally weak by historic standards. Only two other periods in the time series were as low — the third quarter of 2022 and the first quarter of 2021. The issuance of construction debt for nursing care was almost negligible, in line with its pattern of limited debt financing for new nursing care property construction since NIC began collecting the data in 2016. In general, there has been limited development of new nursing care properties for the past several years.

The total balance of delinquent loans for senior housing inched higher in fourth quarter 2022, but was well below the high levels seen in 2020. Delinquencies as a share of total loans increased to 1.3% for senior housing from 1.2% in the third quarter. For nursing care, the delinquency rate slipped to 1.1%. Note that loans in forbearance are reported in the delinquent loan data for some debt providers. Notably, some foreclosures were reported for the sample in fourth quarter 2022 for senior housing. 

As background, the Fed raised interest rates by 1.25 percentage points (pps) to 4.25%-4.5% in the fourth quarter of 2022 (+0.75pps in November 2022 and +0.5pps in December 2022). Subsequently, the annual inflation rate in the U.S. slowed for a sixth straight month to 6.5% in December 2022, down 2.6pps from the highs seen in June 2022 (9.1%). Meanwhile, senior housing construction starts remained relatively low in the fourth quarter of 2022, and the number of senior housing units under construction in the 31 NIC MAP Primary Markets remained near its lowest level since 2015, according to data released by NIC MAP Vision. 

Download the complimentary 4Q 2022 NIC Lending Trends Report for full details on these and other trends in senior housing and skilled nursing lending. 

Note: These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only. 

The 1Q2023 NIC Lending Trends Report is scheduled for release in mid-August 2023. 

Interested in participating? The NIC Lending Trends Report helps NIC Analytics to deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them. 

If you would like to participate and contribute your data, please contact us at analytics@nic.org. As a courtesy for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution. 

The Bureau of Labor Statistics (BLS) reported that the unemployment rate slipped back to 3.4% in April from 3.5% in March. This places it at the same level as in January at 3.4%, which was its lowest level since 1969. It has been hovering in a narrow range for many months now and underscores the ongoing tightness of the labor market.  

Separately, the BLS also reported that nonfarm payrolls rose by 253,000 in April 2023, below the monthly pace of 290,000 over the prior six months, but still strong. The three-month average gain in nonfarm payrolls was 222,000 as of April, below the 295,000-pace seen in March and the 430,000 pace in February. Market expectations had called for a gain of 185,000 jobs. Of note, revisions subtracted 149,000 positions to total payrolls in the previous two months.

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.16 in April to $33.36 or up 0.5% from the prior month, the largest monthly gain in the past year. This was an increase of 4.4% from year-earlier levels, slightly more than in March at 4.3% (revised from 4.2%). The average hourly earnings data suggest that wage pressures are not easing rapidly. Earlier this week, the BLS released the employment cost index (ECI) which also showed that underlying pressures on inflation remain. Wages and salaries paid to workers rose 5.1% in March from a year earlier.

Today’s report shows the labor market remains tight, with the economy still creating jobs at a solid, albeit slowing pace. Notably, the gain occurred despite the turmoil in the banking sector. In fact, financial sector payrolls rose by 23,000 and professional and business services increased by 43,000. Employment in health care rose by 40,000 in April, compared with the average monthly increase of 47,000 over the past six months. Employment in nursing care facilities grew by 2,600 jobs from last month and 55,100 from year-earlier levels and stood at 1,397,300 positions. Jobs increased by 3,800 positions in CCRC and assisted living facilities and were up by 60,700 from year-earlier levels to 946,500 jobs. 

The Fed is not likely to be heartened by the report in terms of observing a slowdown in the economy and inflation pressures. Earlier this week, the Fed raised interest rates another 0.25 percentage points to a range of 5.0-5.25% to its highest fed funds rate in 16 years as it continues to combat inflation. The Fed is looking for evidence of a softer labor market to help ease wage pressures and prevent a wage/price inflationary spiral from occurring.

Other employment data reports are starting to show a slightly slowing labor market, however. Indeed, earlier this week, the Labor Department released the Job Openings and Labor Turnover report (JOLTS) that showed that the demand for labor is starting to cool down a bit. The ratio of job vacancies to unemployed—a measure that Fed Chair Powell frequently references—was 1.64 in March from 1.68 in February. It has trended lower from an all-time high of 2.01 in March 2022 but remains higher than the 1.19 average in 2019, ahead of the pandemic. Total separations, which includes quits, layoffs and discharges rose by 91,000 in March to reach 5.9 million. 

In the household survey, the jobless rate slipped 0.1 percentage point to 3.4%, down from 3.5% in March. Both months’ unemployment rates were well below the 14.7% peak seen in April 2020. The drop in the jobless rate reflected a decline in the civilian labor force (43,000) coupled with a relatively small rise in household employment (139,000). The underemployment rate was 6.5% versus 6.7% in March.

Among the major worker groups, the April unemployment rates were 3.1% for adult women, adult men (3.3%), teenagers (9.2%), Whites (3.1%), Hispanics (4.4%), Blacks (4.7%), and Asians (2.8%). 

The labor force participation rate inched up to 62.6% in April, unchanged from March and up from 62.5% in February, which followed three prior monthly increases in the rate. It was below the February 2020 level of 63.3%, however. The number of long-term unemployed (those jobless for 27 weeks or more) was 1.2 million in April. These individuals accounted for 20.6% of all unemployed people.