The senior living industry is showing signs of a strong rebound in occupancy and promising demand prospects for the year ahead. Rick Brace, director of AEW Capital Management’s research group, recently published a report highlighting the industry’s positive outlook for 2024. He believes that the sector, especially in the private-pay segment, is on track for a full recovery.
Brace noted that between 2010 and 2019, the demand for senior housing grew at an average rate of 2.3% based on net absorption of units. However, this rate increased to 4.9% between 2022 and 2023, indicating a significant uptick in demand.
Attendees at the NIC Spring Conference also expressed optimism for the industry, with 79% of respondents in a recent survey indicating a positive outlook for 2024. Despite a 900-basis-point drop in occupancy during the Covid pandemic, the industry is now only 140 basis points below pre-pandemic levels. This, coupled with a slow-down in new construction starts, is expected to further drive demand in the senior living market.
Occupancy rates have been gradually improving, with primary and secondary markets averaging 85.8% as of 4Q23, aiming for a stabilized rate of 87%. Brace anticipates that as occupancy continues to rise, senior living margins will also bounce back.
Furthermore, there has been a noticeable decrease in labor costs across all sectors, contributing to a more stable financial outlook for senior housing companies. The industry also saw an increase in transaction volume towards the end of Q4, suggesting a potential increase in liquidity in the marketplace.
Overall, these factors point towards a ‘positive story’ for the senior living industry in 2024, with prospects for growth and recovery on the horizon.
