Most of us saw it coming, but the seniors housing industry hit new occupancy lows in the fourth quarter of 2020, according to new data from NIC MAP. The sector experienced a drop of 130 basis points from the third quarter average of 82.0% to 80.7%, based on the reporting communities in 31 primary markets. Across the entire industry, including those properties that do not report their occupancy figures, the average census could be lower. 

The assisted living market continues to feel the pain of higher move-out rates and fewer move-ins because of the lockdowns, impacts to demand and, of course, the holiday season. That dropped the sector’s average occupancy by 1.3 percentage points to 77.7%, while the independent living market experienced a 140-basis point decline to 83.5%. Most likely, the end of quarter occupancy rates were lower than the quarterly averages for both IL and AL. 

Since March, assisted living and independent living occupancy has fallen by 7.4 and 6.2 percentage points, respectively. It helps that IL communities started the year at a higher basis, in addition to having a naturally slower move-out rate. For skilled nursing facilities, the average occupancy rate fell further to just 75.3% in the fourth quarter. The good news is that the decline was less steep than the previous quarters.  

The census decline in the second half of 2020, although unprecedented and caused by obvious outside factors, will only worsen a stubborn issue like rent growth, which fell from 1.9% in annual growth in the third quarter of 2020 to 1.4% in the fourth quarter. Hope of a census comeback in the first half of 2021 is also quickly fading, considering the slow distribution of the COVID-19 vaccines and the historical census trends in the first half of nearly every year (as we covered in the October and November issues of The SeniorCare Investor). If you haven’t read our analysis, average census almost universally dropped in the first two quarters of every year, for a variety of factors. 

Inventory growth in the seniors housing sector slowed from 3.0% in Q3 to 2.9%, which is good news. But we wonder if construction will slow enough in 2021 and 2022 to allow for a quick occupancy return to “normal levels,” whatever that may be in the future. Amid the construction fervor in the mid-2010s, many developers seemingly had blinders on, convinced that the overdevelopment and occupancy issues facing other communities certainly wouldn’t happen to them. It’s a different world now, but how different, we will have to wait and see.