A recent NIC MAP Vision report presents a mixed outlook for the senior living industry, with both positive and negative findings. On the bright side, current trends suggest that the industry is set to achieve an average occupancy rate of 90% by 2026, driven by increasing demand as the population ages. However, beyond 2026, the report highlights a concerning shortfall in development rates compared to demand. Without a 3.5-fold increase in development speed, a $275 billion “supply gap” is projected to emerge by 2030.
Despite challenges such as financing issues leading to a 40% decrease in transactions and a decline in new construction rates to just 0.2% in 2023, the report emphasizes the urgent need for accelerated development. The current pace falls significantly short of the required inventory, with only 25% of necessary units developed to date. Additionally, long project completion times further compound the issue, as developers cite an average duration of two to three years for new construction projects.
While labor cost growth in 2023 has lagged behind rent increases, providing operators with greater margin flexibility, the industry saw a 4.6% average growth in Net Operating Income (NOI) last year. This has led to optimism among operators regarding revenue prospects, paving the way for a resurgence in growth strategies through new developments.
Overall, the report underscores the critical need for the senior living industry to ramp up development efforts to meet future demand effectively. With market confidence in occupancy and operating margins high, operators are urged to capitalize on the opportunity for expansion and investment in this sector.
