What New Data Says About the Senior Living Industry’s Future Recovery

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New senior living industry data shows that conditions are favorable for a sustained senior living recovery in the months ahead — but even so, operators need to shore up their portfolios and strike while the iron is hot to see meaningful census gains.

While prolonged senior living demand has allowed for stable occupancy rebuilding, a new metric from the National Investment Center for Seniors Housing and Care (NIC), combined with data from other industry-watchers, such as Aline and anecdotes from operators on the ground, are shedding new light on how effectively markets are handling new units, and what sort of market conditions might be down the road.

On the whole, the data shows senior living operators are making good progress in 2023, and that conditions are favorable for more growth and recovery down the road. Data from NIC appears to show that a stunted development climate, mixed with strong demand could help sustain occupancy gains nationwide. But the pace of the recovery may be slower than conventionally expected, with data from Aline showing that the pace of move-ins during the pandemic did not substantially change during the period of historic disruption.


“We keep getting questions about getting back to pre-pandemic levels and we’re just trying to show the market that we’re not that far away now and the velocity does look good today,” said NIC Senior Principal Caroline Clapp.

What NIC’s new formula says about the future

Publicized only a couple of months ago, the new AIV formula, the “absorption-to-inventory-velocity (AIV)” is aimed at being a barometer of health for how effectively a given market can absorb recently added units.

It is formulated by dividing the number of recently-occupied units within a certain time frame by the number of newly-added units to the market during the same period.


For example, a higher positive ratio shows stronger demand relative to inventory gains, indicating a more robust and healthy market. A lower positive ratio, on the other hand, could indicate slower absorption of units, leading to an oversupplied market that translates to weaker demand. And a negative ratio could show that there’s negative demand and a market is oversaturated with units.

NIC is using a 10-point measurement as the AIV threshold to help interpret just what the ratio means. When the AIV ratio is above or below the threshold, it gives context of how absorption is keeping pace or being outpaced by new growth. This leads to creating optimistic, moderate or challenging scenario designations within the AIV ratio, with the first scenario signaling strength ahead and the latter two indicating eroding conditions and more challenges.

NIC data from the second quarter showed that demand, as calculated by the fluctuation in occupied units, continued to exceed new supply on the market nationwide. This marks the ninth straight quarter of growth of net absorption gain of 0.9% (5,092 units) from the first quarter and 4.6% (25,803 units) from 2022 absorption levels, with senior living occupied stock 2.6% above pre-pandemic 1Q20 levels.

Researchers at NIC told Senior Housing News that the strong demand within the industry has been a key factor in the industry’s ongoing occupancy recovery.

“We saw a need where we could create a ratio that actually serves as an indicator not only of occupancy, but also of how effectively the market absorbs or leases the newly-supplied units on a net basis,” said NIC Principal Omar Zahraoui.

As it stands, demand for senior living remains strong, thanks in no small part to the lack of new construction starts across the industry. On the whole, this year has seen a steady increase in occupancy gains for seemingly all providers that are well-positioned to make gains.

In the second quarter, inventory for senior housing in the 31 NIC MAP Vision Primary Markets increased by 0.2% from the first quarter and 1.3% from 2Q22, marking the smallest inventory gains in the last 10 years, NIC data shows.


The level of new starts is also down substantially. In the last four quarters leading up to the second quarter of 2023, new starts amounted to 11,673 units, a level of new starts not seen in over 10 years since 2012.

In the five years preceding the pandemic, the senior living industry was flooded with new units which signaled an oversupply of units and a decline in occupancy, Zahraoui said. That resulted in negative absorption to be designated as a “challenging” scenario by NIC’s standards.

That scenario of negative absorption has only occurred in six quarters, a quarter in 2009 following the Great Recession; the first quarter of 20215 and four consecutive quarters during 2Q20 and 1Q21 amid the height of the Covid-19 pandemic, per NIC data.

This shows that while conditions in the industry are tough, well-positioned operators can take advantage of leasing up their buildings and making gains on census through sound operations and marketing efforts.

In the second quarter, NIC tracked a net absorption of 45 units, the highest AIV ratio (+45:10) since data began being collected in 2005. That’s an indicator of the demand seen across markets and care types. At its lowest, the ratio was -38:10, meaning that for every 10 units added, 38 were being vacated and placed back on the market.

“That’s huge,” Zahraoui said. “This suggests an ongoing trend of high-acuity demand in the senior housing market today.”

Needs-based senior living sectors, including AL, are recovering more quickly, with occupancy for AL across NIC’s Primary Markets was 83.6% in June, down just 0.6% from its 1Q20 levels of 84.2%.

“It appears unlikely that the AIV ratio for majority assisted living will dip below the AIV threshold in the near future, and thereby causing prolonged occupancy declines,” Zahraoui wrote in the August NIC newsletter.

The AIV ratio for senior housing also jumped to +29:10 for primary markets and +40:10 for secondary markets that infers that for every 10 added units, 29 and 40 units would be absorbed in both market types.

Zahraoui posited that given the data, the senior living industry’s recovery will likely be sustained in the near-term, given the industry’s current supply and demand conditions.

But it is “essential,” Zahraoui added, that operators recognize “regional differences and regional nuances” for tailoring their operations and sales tactics accordingly.

“I think in the ever-evolving world of senior housing, being attuned to such regional insights and resident providers could very well be the key to future success,” Zahraoui said.

Senior living hotspots see recovery resurgence

Just what the recovery of senior living since the pandemic looks like is ever-changing, but recent occupancy data from NIC coupled with other data from Aline shows that the senior living industry is nearing pre-pandemic conditions with regard to operational health. Some regional hotspots may see an even greater resurgence of demand, the data shows.

Operators in the Northeast and Southwest are recovering at the most rapid pace, Clapp told SHN, with nine quarters of positive absorption as secondary markets saw strong gains. Clapp noted that the Northeast has 3.5% left to recover to pre-pandemic levels, along with the Mountain West, Southwest and Southeastern U.S. was “well-under three percentage points” to get back to recovery.

Meanwhile, lead generation, volume and move-in volume are approaching or in some cases are at pre-pandemic levels, according to Aline Vice President of Research and Analytics Lana Peck. But it should be noted that move-in velocity remains relatively unchanged by the pandemic, as previously reported by SHN.

“I think that’s a very important takeaway for operators to understand,” Peck said. “You can’t expect your sales teams to be pulling the types of move-ins that you did in 2021 and 2022, it’s going to take some effort given the economic conditions that we have.”

Peck said operators must put more emphasis on curating leads from digital channels, emphasize outreach and “develop a relationship” to help spur interest in move-ins.

“The rubber really meets the road in the sales process and that’s an area operators should really put some focus on if they have the proper resources,” Peck added.

But despite gains being made across the industry, thousands of new units remain unoccupied in both primary and secondary markets, with 113,348 units and 52,854 units open, respectively. In total, there are an estimated 34,401 and 15,057 units under construction in primary and secondary markets, NIC data shows.

That shows that the market still has “significant supply capacity” to absorb inventory growth during the pandemic.

The recovery has been exemplified in the operations of Tucson, Arizona-based Watermark Retirement Communities, with the company ramping up its occupancy to over 90% this year within its stabilized portfolio, according to Chief Investment Officer Bryan Schachter. 

“We’ve seen a similar positive trajectory on both coasts,” Schachter said, referencing Watermark’s portfolio of communities. “But we’ve seen stronger recovery in the West.”

Some of the step gains made in its Western U.S. portfolio could be attributed to sharper pandemic-era restrictions stunting occupancy, meaning those markets had more to recover than less-regulated locations.

With a growing number of luxury-focused communities in the Elan Collection, Watermark has reported “very very strong” growth in lease up over the last 18 months.

“On the West Coast, we’ve nearly doubled our number of occupied beds since the middle of last year as compared to where we are today,” Schachter said.

That momentum has also carried over to projects in lease up on the East Coast, Schachter added, having “nearly doubled” occupied beds since last year. Watermark is also in the midst of executing on a robust development pipeline, even as challenges to development remain.

“Demand continues to come our way and while there’s been new supply added, we’re not quite back to where we were on a percentage basis of pre-pandemic occupancy,” Schachter said of Watermark’s recovery and broader senior living industry as a whole. “But we are at a greater number of occupied beds.” 

That implies that demand could remain strong for the foreseeable future and benefit existing communities to increase census rather than compete against new development.

To capture that demand, Schachter said Watermark is focused on promoting the services it offers to capture a larger market share from a programming perspective, Schachter said. With a substantial lower acuity exposure, Schachter said Watermark teams were focused on promoting the lifestyle benefits of moving in.

“So we are looking for people that are making a lifestyle decision to move in and not just relying exclusively on a needs based decision,” Schachter said.

While Watermark has seen success on its lower acuity offerings, higher-acuity communities are still showing the strongest signs of sustained recovery and health given the industry’s overall development challenges.

But ultimately, capitalizing on demand will lie in an operator’s ability to convert prospects to move-ins, while understanding the dynamics of the local market they are in. Amid the headwinds, Zahraoui reiterated that current market conditions could favor higher acuity communities, but time will tell.

“The high acuity trend that is taking place in the market is in favor of majority assisted living properties for now,” he added. “ We don’t know where the market is heading but for now, this is the situation that we’re in.”