Between demand for senior living and a new interest rate cut, companies in the industry have some things to look forward to in the years to come. But a “funky” supply-demand imbalance is still here to stay for now, as new projects take years to come to fruition.

For one, demand is set to push occupancy higher in the months and years to come. Another sign of more positive things to come is the U.S. Federal Reserve’s decision Wednesday to slash interest rates by 50 basis points.

Lisa McCracken, head of research and analytics at the National Investment Center for Seniors Housing and Care (NIC), said during a Sept. 18 Argentum webinar that occupancy rates have increased steadily for the past 12 consecutive quarters and she anticipates the trend to continue with the closing of the quarter. At the moment, average occupancy in all of the 31 major metro areas NIC tracks are averaging above 80%.

Earl Parker, president and CEO of Commonwealth Senior Living, said occupancy has rebounded to just above pre-pandemic levels across all of its care levels.

However, according to Parker, while the pace of move-ins is remaining strong, the amount of occupancy growth is starting to show signs of slowing.

“We’ve seen the move-outs increasing at the same or higher pace as move-ins more recently,” Parker said. “We’re seeing a higher acuity of move-in and shorter length of stay, so we’re having to work harder to drive more move-ins in order to make up for the losses on the backside.”

‘Funky imbalance’ to linger amid more positive signs

Although occupancy is up and moving in the right direction with high levels of demand from prospective residents, the industry is still at a “funky imbalance” with regard to supply and demand.

While Wednesday’s 50-basis-point rate cut will likely spur some new M&A and borrowing activity, it will take years – not to mention additional rate cuts – before that benefits senior living “in a meaningful way.” Still, the rate cuts will have a positive psychological benefit, McCracken said.

“We’ve been talking about this light at the end of the tunnel with the Fed movement,” she said. “So, I think it’s going to really spawn some bullish outlook out there.”

A general theme for over the past several years is the slowing down of new supply that has been coming into the market, largely due to increasing construction costs and interest rates. At the moment, it is anticipated there will be a $275 billion development “supply gap” set to emerge by 2030 if development continues at its current pace.

Parker said the slowdown in new development has led to fewer new communities sprouting up around the company’s properties, which has spurred occupancy growth. Even one new competitor coming into the region can have a “pretty big impact” on a community’s operations.

“We do still have a few new competitors that are coming into markets over the next 12 months, and we expect to have a short term pressure on the occupancy in those areas,” he said.

McCracken said the data NIC tracks puts current construction starts and inventory growth at a rate similar to the great financial crash that occurred in 2008. Additionally, companies that are continuing to develop despite the challenges and pressures are taking longer to complete projects between lingering supply chain disruptions caused by the pandemic, approvals and construction delays.

However, those that are developing could be reaping the benefits, she said.

“I think if you can bring some new competition into the market in this environment, I think it’s going to pay off,” McCracken said.

McCracken noted that while the total number of transactions occurring in 2024 have been on the rise, the total volume of deals has decreased compared to recent years.

Parker noted the current market has been beneficial for Commonwealth, however, and the company has been able to expand by acquiring distressed properties and then investing in them.

“I don’t see a lot of stabilized deals transacting again in our market,” he said. “My guess is, if the interest rates start to come down, maybe more will free up.”

‘We’ve got to be better’ about new resident needs

Parker that new residents are arriving at the company’s communities in need of more care than they previously did, a trend that has lasted for a few years now.

In order to adapt to that trend, Commonwealth has looked to provide additional value and care for its residents.

One of the ways the company is offering additional care for residents is by integrating The Story of Life program, which “captures a resident’s life story” and uses it to build programming around their interests and needs. The program also has communication tools to connect residents with their family members and partners within the community.

“We’ve got to be better at understanding each resident’s individual needs, preferences, wants and and goals for their time with us and their families, and then trying to make sure we do everything we can to make sure our teams know what those are and how to deliver on it,” Parker said.

Parker noted the industry has to be better about the healthcare side of the industry because of the rising acuity seen in communities, particularly those with assisted living and memory care offerings.

One of the ways Commonwealth is incorporating additional primary care services is through a beta in eight of its communities in partnership with providers Curana Health and Serviam in an effort to offer better care coordination and help drive more care revenue.

“Everyone’s got clear communication about how we can make the quality of life better for that resident and their family, and hopefully that leads to a longer length of stay, which is where we really feel like the main value will come back to us as a provider,” Parker said.