Senior Living’s Occupancy ‘Barbell’ Suggests Pandemic Winners, Losers

Although senior living occupancy rates are at historic lows as a result of Covid-19, the effect on a market-by-market basis is not uniform. As a result, operators with high occupancy rates are able to withstand continued disruption to operations better than providers struggling with occupancy woes, pre-pandemic.

This was among the takeaways from a media briefing on the eve of the fall conference from the National Investment Center for Seniors Housing & Care (NIC). This year’s event will take place in a virtual setting because of the pandemic.

Until a vaccine is created and available, occupancy and operations will continue to struggle, even as economies begin to recover at local and regional levels, NIC Chief Economist Beth Mace said. But the pace of those recoveries are also varied by market.


Operators continue to prioritize the safety of residents and front-line staff, but Covid-19 fatigue is affecting each – notably, operators across the country are contending with staffing shortages and keeping residents and workers safe, healthy and engaged. Budgetary pressures stemming from higher expenses and a slower pace of new move-ins persist. Testing for the coronavirus remains expensive, impacting the frequency with which residents and staff can be tested. And providers must contend with a patchwork of federal, state and local public health guidance.

But the industry shifted during the pandemic’s seven months from the triage of the pandemic’s early weeks to a management phase, with no clear end in sight without a developed vaccine, Mace said. The response now resembles a marathon, rather than a sprint, and the industry has proven itself to be as adaptable in its response as more is learned about Covid-19.

“We won’t go back to the way we were. The new normal will not be the old normal,” she said.


‘Barbell’ effect

The pandemic was the primary driver in a record-low occupancy rate in the second quarter of 2020, at 84.9%, and Mace observed bifurcation in the market at the time.

With more information available, the bifurcation in the market is crystal clear, creating a pronounced “barbell” effect on occupancy rates and, by extension, operational pressures.

NIC reported 1,130 properties with occupancy rates at 95% or higher in the quarter, in the 31 primary markets where it tracks performance. That represented 22% of total inventory, and the number was down from 1,666 in the first quarter of 2020.

By contrast, the total number of properties with occupancy rates at 80% or lower increased from 1,113 in Q1 to 1,446 in the second quarter – 28% of total inventory.

Moving forward, Mace predicts a variety of performances. Operators with higher occupancy rates will be able to withstand the stress of Covid-19, in terms of their occupancy and their revenues. Those struggling to growing occupancy will find themselves inching closer to distress.

Senior living distress has emerged in the past few months, notably among providers managing single communities or smaller portfolios that were struggling before the pandemic’s initial disruption.

NIC has shifted its occupancy reports to monthly throughout the pandemic, and will be able to provide a more complete picture of where occupancy is going when it releases its Q3 2020 data on October 15, Mace said.

K-shaped recovery

A recovery in occupancy will likely be tied to a greater economic recovery. But even that will occur in varying stages.

Mace sees an economic recovery as “k-shaped,” where people who have been able to return to work from home will recover faster than the workers hardest hit by the pandemic, such as service industry and hospitality workers who lost their jobs and are struggling to make ends meet with no additional unemployment relief in sight.

Mace is unsure how much longer workers on the lower tail of the “k” will struggle, as unemployment numbers continue to be a mixed bag. While more people are returning to work, many jobs may be permanently lost. And senior living has not seen a flood of new workers, from a combination of enhanced unemployment benefits and concerns about the safety of working in senior housing.

The pace of recovery will continue to be sluggish until therapies and a vaccine become available. That still may be months away, at least.

“The actual development of a vaccine and then its implementation and distribution will take a long time, even if we get a vaccine right away,” Mace said. “It’s not going to be an instant recovery; this will weigh on our industry for a long time to come.”

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