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After ‘Crazy, Record-Strong’ Senior Living Demand, Investors Expect More Occupancy Growth

Average senior living occupancy is steadily on the rise, and looking ahead, industry investors expect that trend will continue.

Just over three-quarters of investors, 80%, believe that occupancy will rise by at least 2.5 percentage points in the coming 12 months, according to the most recent investor sentiment survey from Wealth Management Real Estate (WMRE) and National Investment Center for Seniors Housing (NIC). The survey, which was first teased in an early release Monday, is based on responses from 208 participants who answered an online survey in June.

The investors’ relative optimism regarding occupancy growth is underscored by the “crazy, record-strong” levels of demand the industry has seen in the last three quarters, according to Beth Mace, chief economist at National Investment Center for Seniors Housing & Care (NIC).

Demand, as measured by the change in net absorption, grew by more than 8,600 units across the 31 NIC MAP Vision primary market. That represents the strongest demand ever recorded by NIC MAP Vision, save for the pent-up demand the industry saw materialize in the last half of 2021.

“That’s a really positive sign that the sector is still popular, that seniors want to move into the properties,” she said during a webinar about the latest survey release on Tuesday. “In terms of transactions, there are a lot of investors that are interested in this sector.”

Although the majority see occupancy growth ahead, only a little more than a quarter of the respondents, 28%, said they thought the industry was in a recovery or expansion phase. That is down markedly from last year’s survey, when almost half of the investors said the same.

Similarly, 26% of investors believe the industry is in the midst of a recession phase over the next 12 months. Only around 10% said the same in 2021’s survey.

While they were divided on current economic conditions, 90% of the respondents said they expect Covid-19 costs to continue to rise over the next 12 months, with 78% expecting to incur permanent expense increases due to the pandemic.

And on the matter of staffing, investors were less optimistic. Specifically, 70% of the respondents said they were having a “very or extremely challenging situation” hiring frontline workers. Another 63% said the same about LPNs.

They also reported that turnover was still a serious industry issue, with a reported turnover rate of 80% for frontline workers in their first year on the job.

While occupancy is on the rise and construction starts are still muted, staffing will continue to present a challenge and pressure bottom lines for substantially the entire industry. There are also factors that are out of the industry’s control that could impact senior housing demand or dealmaking in the months ahead, Mace said.

At the end of the day, Mace said there is plenty for investors to be cautiously optimistic about in 2022 — and that is reflected in the fact that the majority of respondents in the most recent survey, around 55%, said they have no plans to change their investment strategies in the short-term.

“The industry was unquestionably impacted by the pandemic,” she said. “But the fact that the operators within the space have survived this … will help the sector continue to persevere for years to come.”

The post After ‘Crazy, Record-Strong’ Senior Living Demand, Investors Expect More Occupancy Growth appeared first on Senior Housing News.

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