Vital Signs Fall 2021: Healthcare and Medical Office Report

VITAL SIGNS

Unit absorption turned sharply negative in the senior housing space as a result of the pandemic. The impact was felt across property types, though it was most pronounced in the higher acuity formats, namely assisted living and nursing care. Indeed, nursing care-occupied units fell by 51,800 cumulatively in the four quarters ending Q1 2020, more than twice the number of the other three product types combined. Negative absorption held from the second quarter of 2020 through the first quarter of 2021. In the second quarter of 2021, net absorption turned positive once more for all product types except for CCRCs. These demand trends are reflected in the occupancy data. Nursing care was impacted the most as occupancy has fallen 11.8% cumulatively since Q1 2020. In contrast, however, the sector has also had comparatively the largest rebound QoQ in Q2 2021. Assisted living was the next worst impacted (-9.1%, cumulatively) followed by independent living (-8.3%) and CCRCs (-7.1%). Overall, CCRCs and independent living facilities boast the highest occupancies. Early in the pandemic, senior housing facilities saw significant and very public case growth and resident fatalities. The failure of many facilities to reduce spread among their denizens was attributed, in some cases, to public policy failures and in others, to facility level failures to enact appropriate contagion control procedures as quickly as the situation warranted. It is not surprising, therefore, to see that demand declined significantly as seniors who might otherwise have considered moving into senior housing delayed this transition while others returned to their families where they perceived themselves to be safer. Sadly, resident deaths are also part of the explanation for the particularly sharp falls in demand for assisted living and nursing care units. We do not, however, expect the pandemic to cast a pall over the sector moving forward. Senior housing centers were the initial focus on the U.S. vaccine drive, and high resident vaccination rates paired with overcoming operational safety challenges have contributed to a rapid rebound. Supported by the well-attested demographic forces driving growth in the sector, we expect demand and thence occupancy levels to rebound strongly. As noted, the second quarter data already points in this direction.

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