In 2023, the senior living lease-up process is trending back toward the pre-pandemic normal — and what constitutes a stabilized community is still evolving.
Recent data from NIC MAP Vision showed that lease-up trends across the country were accelerating, but that the headwinds of recent years had made it more difficult for operators to reach and exceed their stabilization goals.
In some cases, that has forced operators to set a lower bar for stabilization than in the past. For example, Legend Senior Living Senior VP of Sales and Marketing Christy Van Der Westhuizen said that before the pandemic, she considered stabilized occupancy as being in the 94% to 95% range.
“Now, it’s probably 90%,” Van Der Westhuizen told Senior Housing News.
But while stabilization has evolved from its pre-pandemic norms, she thinks the industry will return to its former metrics in the future.
“I don’t think we’re always going to be stuck in this mindset of being happy with 90%,” she said. “But, right now, as we’re inching toward that – we’re celebrating that.”
Stabilization in 2023
It’s a story nearly all operators are now familiar with: Occupancy fell in 2020, necessitating a longer runway for building back census and revenue.
The most recent NIC MAP Vision data showed occupancy at 83% in February, up 0.2 percentage points from January.
The overall occupancy in NIC primary markets was 83% in 4Q202, compared with 84.9% in secondary markets for 4Q2022. For secondary markets, average occupancy is just 1.8 percentage points below pre-pandemic levels, compared with 4.9 points in primary markets, according to NIC Associate Principal Omar Zahraoui.
According to the NIC data, the rate of senior living communities that failed to exceed 80% occupancy since opening has sharply risen since 2020.
Less than 3% of communities that opened before 2017 have failed to hit their 80% campus occupancy benchmark, according to the NIC data. But almost one-quarter of properties that opened in 2018, almost 40% of the properties that opened in 2019 and more than half of properties that opened in 2020 have not hit the 80% occupancy mark.
NIC MAP Vision data published earlier this month showed that the stabilization rate for senior housing in primary markets ticked up in February to 84.3% – an increase of 0.2 percentage points from January. The report also showed that stabilized occupancy continued its quick recovery pace for assisted living compared with independent living.
Demand and lease-up
Still, some operators like Legend Senior Living and Arrow Senior Living Management are leasing up new properties at a rate that, in some cases, is outpacing their expectations.
For Priority Life Care, a tepid start to the year has turned into robust demand in the spring. COO Bobby Petras called January and February near “record slow months for us.”
“I went back seven years and couldn’t find any period that was even close to it,” he said.
On February 16, Fort Wayne, Indiana-based had 16 move-ins on the year for the 26 Ventas (NYSE: VTR)-owned communities.
But now, that number is nearly 40.
“March has been crazy,” Petras added.“We’re going to have double-digit move-ins for four of the buildings that are in lease-up right now and were opened in the last six months whereas in the prior two months, it was maybe three or four move-ins.”
Fort Wayne, Indiana-based Priority Life Care has always considered a stabilized community to be above 90%, according to Petras.
“It depends on the size of the building,” he said. “We’ve got four buildings right now that are at 100% … one of which has been at 100% for the last six months.”
Wichita, Kansas-based Legend is seeing similar trends related to demand at its 45 communities. For example, one Legend community in Florida, Windsor Pointe in Jacksonville, has been “blowing all of our projections out of the water,” Van Der Westhuizen said.
The community is so in-demand that Legend has had to add new on-site events to the calendar just to bring more residents through the door.
“We are way above occupancy and way above NOI,” Van Der Westhuizen said.
The community has exceeded its budgeted occupancy by 21% and is projected to reach stabilization in 17 months, besting the operator’s typical lease-up period of 24-36 months for an independent living community of its size.
Other operators are ratcheting up efforts to fill the supply they had. St. Louis-based Arrow opened eight new communities during the Covid-19 pandemic, and in 2023 leasing trends have outpaced even its best pre-pandemic years.
“It shows you that between the combination of marketing efforts and unit mix, new [communities] are great,” Arrow CEO Stephanie Harris told SHN. “The interest level is off the charts.”
Arrow’s most recently opened community welcomed new residents in November and only has about a dozen units left to fill, Harris said.
“Typically, it would have taken that building about a year to stabilize. So, we’re cutting that in half,” Harris said.
Other examples include the Shreveport, Louisiana-based life plan community The Glen Retirement System, which opened last July and is already full. The building was named the Best Design: 55+ by Senior Housing News for 2022.
Alpharetta, Georgia–based Oaks Senior Living is in the process of leasing up two of its most recent developments which opened 15 months and 11 months ago, respectively, according to CEO Bear Mahon.
Oaks’ most recent development is approximately 56% occupied and the older community is about 66% “so, those new builds are good,” Mahon said.
As it has been in the past, newer buildings are an easier sell and hold a relative advantage during lease-up.
“[New buildings] have very open floor plans and amenities, common areas and Bistros where developers in the past didn’t allocate a lot of common space for socialization,” Mahon said.
The post Not Happy With 90%: How Senior Living Lease-Up Is Evolving in 2023 appeared first on Senior Housing News.
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