If you're invested in senior housing developments, the latest data from the National Investment Center (NIC) might have you worried.
According to the NIC, senior housing occupancy has reached its lowest level on record. Just under 81% of senior housing units were occupied in the fourth quarter of 2020, down from 82% the quarter prior. More than a third of all facilities surveyed by the NIC reported decreasing occupancy in the last week of December.
Independent and assisted living facility occupancy dropped 1.4% and 1.3%, respectively. Since March, those two categories have slipped 6% to 7% each.
To make matters worse, rent and inventory growth also slowed across the board. In fact, the number of senior housing units added last quarter marked the slowest inventory growth rate in over seven years.
As a real estate investor, all this probably gives you some pause -- both about your existing investments and new ones you might be looking to make. If you're concerned about the latest senior housing stats, here's what you need to know about the bigger picture before making any decisions.
The vaccine may provide some relief
The pandemic and its well-documented spread in senior housing facilities is certainly playing a big role in declining occupancy and rent growth rates. Fortunately, hope is on the horizon.
With most states now vaccinating both healthcare workers (including those in senior housing settings), as well as senior citizens, the risk associated with these facilities will likely decline. More enhanced sanitation measures and equipment are also helping the situation.
Of course, the rollout of vaccine distribution has been anything but smooth, so it may be a few months before any notable change will be noticed. As Beth Burnham Mace, NIC's chief economist, noted in a press release: "The surge in COVID-19 cases following Thanksgiving and Christmas suggests further disruption lies ahead. That said, the recent distribution of the vaccines should soon provide some relief."
Boomers are aging in
According to estimates, the number of Americans who are senior-aged -- 65 or older -- will nearly double by 2060, topping out at around 95 million individuals. By that point, they'll make up almost a full quarter of our country's population. Additionally, the youngest baby boomers will reach senior age in 2029 -- a mere eight years down the road. So demand is coming.
While occupancy may take a minor detour during the pandemic and as vaccine bumps get evened out, the demand for senior housing facilities will undoubtedly bounce back -- and likely increase -- in the years to come. Like any investment, it will just take a little patience.
The bottom line
Today's senior housing data might look less than optimistic, but the overall market potential is still strong here for investors. With a COVID-19 vaccine currently being distributed and a large swath of the population aging into senior-dom in the coming years, there's a lot to be positive about in this sector.
One thing that could throw a kink in that outlook is the increasing numbers of seniors aging in place. Fortunately, there are ways you can leverage that trend as well (see this Foolish podcast for guidance).