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The senior housing sector, long a solid performer, has run into some problems, with a bad combination of declining inventory and increasing occupancy.
On a national scale, overall senior housing occupancy fell 2.6 percentage points in the 2020 third quarter, from 84.7% to 82.1%, according to a report from the National Investment Center for Seniors Housing & Care. It marks the second quarter in a row where occupancy fell more than 2.5 percentage points, the report adds, “meaning the senior housing sector is now experiencing its largest drop in occupancy on record.”
In specific categories, assisted living and independent living facilities experienced their largest occupancy drop to date, falling 2.9 percentage points to 79.1% and 2.4 percentage points to 84.9%, respectively.
While the people living in senior housing decreased, independent living facilities saw a considerable increase in inventory — posting the largest gain since early 2009, the report adds, pointing to another danger: oversupply. “This reflects the relatively robust lending and development environment of 18 to 24 months ago that supported construction starts back then and which now are completed properties entering the market,” National Investment Center COO Chuck Harry says in the statement. “Construction starts activity in the third quarter continued to be relatively weak, reflecting today’s more constrained capital markets.”
The Tampa market, even though occupancy fell nearly five points in the third quarter from the second quarter, remains the leader among four major Southeast markets NIC analyzes. At 82.7% occupancy in the third quarter, Tampa edges out Atlanta, Miami and Orlando. And more than bragging rights, higher occupancy rates could help facilities outlast the pandemic, says NIC’s chief economist, Beth Burnham Mace. “The operators with higher occupancy rates will be able to take on the stress of COVID-19, Burnham Mace says in the statement, “while those with lower occupancy rates will be more challenged.”
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