Senior Housing Sector Rebounds: Occupancy Rates Soar, Prepandemic Levels Anticipated By 2024

Older adults are moving back into senior living facilities at a rate that could see the sector recover to prepandemic levels during 2024.

The senior housing occupancy rate increased 0.8 percentage points from 83.6% in the second quarter to 84.4% in the third quarter, according to the National Investment Center (NIC) for Seniors Housing and Care. It's the ninth consecutive quarter of occupancy recovery.

The occupancy rate has increased 6.6 percentage points overall from a pandemic low of 77.8% in the second quarter of 2021 but remained 2.7 percentage points below the prepandemic level of 87.1% in the first quarter of 2020.

"Several consecutive quarters of especially strong demand suggest that the need for the care and housing provided by senior housing is recognized," NIC Chief Operating Officer Chuck Harry said. "If demand and supply trends continue at their current pace, senior housing occupancy will recover during 2024."

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Assisted and independent living properties both saw greater demand than supply, but assisted living properties are recovering faster. The assisted living occupancy rate improved by 0.9 percentage points from the previous quarter to 82.6%, while the independent living occupancy rate improved by 0.7 percentage points to 86.1%.

Senior housing inventory growth and new construction continue to be influenced by tight financing. Inventory grew by 0.4% or 2,806 units from the previous quarter. At 1.3%, year-over-year inventory growth was 4.7%, down 3 percentage points from the high of 7.7$ recorded in the fourth quarter of 2019 and the lowest since 2014.

"The story of the past several quarters has been strong demand and slow inventory growth, but a significant number of units remains unoccupied," NIC Senior Principal Caroline Clapp said. "Senior housing and care operators are well-positioned to meet the needs of older adults who increasingly need these services."

Demand for senior housing is only expected to increase as the first wave of baby boomers turns 80 next year, and the 65-and-older population is projected to grow 44% by 2031.

More than 800,000 additional senior housing units will be needed in the U.S. by 2030, Alanna Ellis, a senior housing debt and equity specialist with commercial real estate firm JLL, told real estate publication PERE.

Rising interest rates and high construction costs resulting from inflation have slowed the construction pipeline.

"The combination of both of those factors is a double whammy to construction projects," Ellis said.

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