During four consecutive quarters of increasing occupancy, from 78.0% in the second quarter of 2021 to 81.4% in the second quarter of 2022, the NIC MAP® Primary Markets recovered about 37% of the senior housing occupancy lost during the pandemic, equivalent to 3.4 percentage points (pps) overall.
While senior housing occupancy still has room to make up with a gap of 5.8pps from the pre-pandemic level (87.2%), occupancy growth over the past four quarters has been notable and suggests that the market’s recovery remains well anchored in the short and long term. In fact, according to August 2022 intra-quarterly NIC MAP data, powered by NIC MAP Vision, senior housing occupancy is on track for the fifth quarter of gain as it recorded its largest monthly gain in July 2022 since October 2021 and continued to improve through the month of August 2022.
Many factors continue to influence occupancy recovery for senior housing. This analysis will focus on a trifecta of factors – demand recovery (as measured by the change in occupied stock), inventory growth during the pandemic, and the construction pipeline (as measured by second quarter 2022 construction as percent of inventory) — and how these idiosyncratic factors are shaping the senior housing occupancy growth and recovery across NIC MAP Primary Markets, resulting in a slower recovery in some markets and faster in others. The exhibit below provides a zoomed-in view of these measures for senior housing across select NIC MAP Primary Markets since the pandemic began to influence the sector in first quarter 2020.
Demand Recovery. Within the NIC MAP Primary Markets, 78% of senior housing units vacated during the pandemic have been re-occupied as of the second quarter of 2022, equivalent to over 35,500 units absorbed on a net basis over the period from first quarter 2021 to second quarter 2022. However, 28% of units lost during the pandemic (equivalent to about 10,000 units) still need to be reabsorbed for occupied stock to fully recover and return to first quarter 2020 level. Said differently, second quarter 2022 occupied stock remained 1.8% below first quarter 2020 level.
Inventory Growth. Over the period from first quarter 2020 to second quarter 2022, the inventory of senior housing properties for the Primary Markets grew by about 34,700 units or 5.3%, although the pace of senior housing inventory growth since first quarter 2020 has remained slow compared with pre-pandemic levels.
Construction Pipeline. Within the Primary Markets, there were over 35,000 senior housing units under construction in the second quarter of 2022. As a share of inventory, this amounted to 5.1%. Supply dynamics, including inventory growth during the pandemic and units under construction as a share of inventory, varied across markets.
Senior housing occupancy up from pandemic low in all Primary Markets, but the occupancy recovery is taking a lot longer for some markets than others and has been influenced by both supply and demand dynamics.
The Lowest Occupancy Rates in Second Quarter 2022. Atlanta and Cleveland experienced the fastest recoveries in terms of units vacated during the pandemic that have been re-occupied. Notably, these two markets saw the largest demand improvements and exceeded pre-pandemic first quarter 2020 occupied stock by 5.2% and 2.3%, respectively. However, due to their respective relatively large increases in inventory during the pandemic, Atlanta (77.8%) and Cleveland (78.2%) occupancy rates remained below pre-pandemic levels and ranked the lowest among the 31 Primary Markets. These two markets illustrate the impact of supply offsetting demand and putting downward pressure on a market’s average occupancy and thereby slowing down its recovery.
Markets Near Full Occupancy Recovery. San Antonio (81.8%) and Dallas (82.4%) occupancy rates have been recovering fast. From their pandemic lows, San Antonio recovered 5.9pps and is now 1.5pps below its pre-pandemic level, and Dallas recovered 6.1pps and is now 1.4pps below its pre-pandemic level. Interestingly, the occupancy rankings for both markets among the 31 Primary Markets saw notable improvements—San Antonio went from being ranked twenty-eighth in first quarter 2020 to fourteenth in second quarter 2022, and Dallas improved from twenty-fourth in first quarter 2020 to tenth in second quarter 2022. These notable improvements in occupancy rates and rankings are the result of a fast recovery in occupied stock but also importantly a balanced new supply.
Markets with the Highest Rates of Construction. Looking ahead, markets with the largest number of units under construction as a share of existing inventory, such as Miami, may experience a slowdown in occupancy growth as new units enter the market. This is also the case for Portland where demand recovery has been slow but due to relatively weaker inventory growth during the pandemic, the market maintained a relatively high occupancy rate in the second quarter of 2022 at 85.0%. However, second quarter 2022 units under construction of about 2,100 units and accounting for 9.8% of existing inventory may impact the market’s occupancy growth in the next two years if its pace of demand remains slow.
This analysis showed that the senior housing industry has been on a steady recovery path from the pandemic since the middle of 2021, and the second quarter of 2022 was no exception. Recovery, while consistent nationally, has nevertheless varied by metro.
To learn more about NIC MAP Vision data, and about accessing the analysis for all NIC MAP Primary Markets, schedule a meeting with a product expert today.