Key Takeaways

  • The seniors housing market made further progress toward recovering from pandemic-era occupancy losses in the fourth quarter. Average occupancy increased 1.0% sequentially to 81.9%, according to the NIC MAP data service.
  • Assisted living and memory care communities recorded the largest occupancy gains.
  • Skilled nursing providers also enjoyed strong demand growth, but per diem rates declined sequentially for the first time in the 123-year series. 
  • Annual rent growth in each senior housing segment set a 13-year series record, paced by a 5.2% advance among assisted living communities.
  • Vigorous demand in Florida metros propelled occupancy rates in the Southeast region to the top in the nation. The North West Central and Pacific Region set the pace in rent growth powered by significant upticks in the Minneapolis, Omaha, Los Angeles, Portland, and Seattle areas.

_____________________________________________________________________________________

Seniors housing performance continued to improve during the fourth quarter of 2022, as robust demand for assisted living and memory care space propelled occupancy and rent growth metrics higher. Market data published by the NIC MAP service show that average occupancy increased 1.0% from third quarter levels to 81.9%, highest since early 2020, and average rent popped 4.9% from comparable 2021 levels, the largest year-on-year growth rate recorded in the 13-year data series.

Needs Driven Segments Continue to Lead Recovery

Segments serving residents requiring assistance with activities of daily life led the recovery. Assisted living and memory care communities net leased nearly 6,400 vacant units in the quarter, representing 59% of senior housing absorptions, up from 53% in the prior quarter. 

Memory care communities recorded the largest occupancy rate gains. Average memory care occupancy improved 180 basis points (bps) to 81.2%, topping the 110 bps increase recorded by assisted living properties and the 80 bps improvement in independent living occupancy rates.

Rent growth was another high point for the quarter, with the higher-acuity segment leading the way. For the year, assisted living and memory care rents increased 5.2% and 4.5% respectively, while independent living communities recorded a 4.4% advance.

Skilled Nursing Census Gains Accelerate

Occupied skilled nursing beds increased by 5,562 in the fourth quarter, the biggest single quarter census gain since 3Q21. Indeed, nursing care was the only major segment to absorb more beds in the fourth quarter of 2022 than the same period a year earlier, elevating bed occupancy to 79.8%.

Conversely, average per diem rent declined sequentially, the first quarterly decrease in series history. Nonetheless, the rate of annual growth accelerated, increasing to 3.2% in 2022, making this the fastest rate observed in more than ten years.

Southeast Region Occupancy Surges, Pacific and Plains State Notch Fastest Rent Growth

Occupancy growth in the Southeast outpaced the rest of the nation. Boosted by strong performance in Florida markets, it rose 3.9% over the year and 1.4% quarter over quarter. Rent growth, on the other hand, was fastest in the North West Central and Pacific regions, topping 6% in each on the strength of outsized gains in the Minneapolis, Omaha, Los Angeles, Portland, and Seattle markets.

Trends in the Great Lakes states were, by contrast, sluggish. Strong growth in Chicago, Cincinnati, and Columbus notwithstanding, East North Central region metro rents advanced only 3.7% over the course of 2022, held down by negligible gains in Cleveland, Detroit, and Milwaukee. Similarly, East North Central occupancy growth was the weakest of all eight NIC regions.

Completions Fall, Units Under Construction Rise

Seniors housing deliveries declined to 3,663 units in the fourth quarter, the fewest since 2011, trimming the rate of annual stock growth to an eight-year low of 2.4%. The supply lull may be short-lived, an interlude brought on by investors focusing on existing facilities trading at discounts to replacement cost. Even as the number of completions fell, units in the under-construction pipeline rebounded, fed by a near 800-unit surge of memory care units.

Seniors housing industry performance continued to improve in the fourth quarter of 2022, chalking up meaningful occupancy and rent gains. However, occupancy metrics still have a way to go before returning to pre-pandemic levels.