Recovery in senior housing continues in Q3

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senior housing

An NIC Map Vision summary of the fundamentals of the senior housing industry reports that they are continuing to improve as the recovery from the pandemic continues.

Segmenting the market

The senior housing market is highly segmented, with NIC Map Vision dividing properties into market segments by the type of units comprising the majority of those on the property. Unit types they consider are: independent living (IL), assisted living (AL) and nursing care (NC) units.

The NIC Map Vision summary gives a quarterly snapshot of the current state of the market for senior housing by reporting on data collected from the top 31 metro markets. The summary discussed here is a freely distributed extract from a more detailed report that is available to their paying clients.

Q3 results

After dropping precipitously at the onset of the pandemic, occupancy bottomed out in early 2021. It began to rise in the middle of that year, at about the same time that inflation took off in the wider economy and rent increases accelerated in market rate apartments.

NIC Map Vision reported occupancy in Q3 2022 was 84.7 percent for IL properties, 79.7 percent for AL properties and 79.3 percent for NC properties. Occupancy for IL properties is up 80 basis points (bps) from the rate reported last quarter and up 1.6 percentage points from the level originally reported for Q1. Occupancy for AL properties is up 90 bps from the rate reported last quarter and up 1.8 percentage points from the level originally reported for Q1. Occupancy for NC properties is up 80 bps from the rate reported last quarter and up 1.7 percentage points from the level originally reported for Q1.

These results indicate that, while the occupancy level in IL properties is about 5 percentage points higher than that in either AL or NC properties, occupancies for all three property types are recovering at about same rate. However, despite the recovery, occupancy in each of the property types remains about 5 percentage points below where it was prior to the pandemic.

NIC Map Vision reported positive annual rent growth for all three senior housing market segments, with rents rising 4.0 percent for IL properties, 4.9 percent for AL properties but only 2.8 percent for NC properties. These increases are up from those NIC Map Vision reported for Q1 or for Q2.

Cap rates, when measured on a rolling 4-quarter basis, were reported to be 6.0 percent for IL and AL properties, up 20 bps from last quarter and up 60 bps from Q1. The cap rate for NC properties was also 6.0 percent in Q3, a level unchanged since Q1. Transaction volume for IL and AL properties was $1.35 billion, up 25 percent from Q2.

The NIC Map Vision report is available here.