NIC MAP just released its second-quarter occupancy trends results, and unfortunately, it was not what the industry had hoped for. For the overall seniors housing industry, average occupancy remained flat at 78.7% from the first quarter to the second quarter.
Given the reports of bottoming out by March for several of the large operators and the REITs with large operating portfolios, and strong census increases in April and May, we were a bit surprised that the quarter-to-quarter change was stagnant. We figured maybe at least a 50-basis point increase or higher. The one thing this tells us is that the early spring momentum did not carry over into June. Or possibly it was the larger companies that rose from the bottom faster. But anecdotally we had heard that the increases were fairly widespread. The initial bump up from what was thought was pent-up demand may have been smaller than most had hoped for.
Another factor that is not good for census is that the annual inventory growth also stayed the same at 2.8% in both the first and second quarters. People were looking for a sharp drop in new openings. In addition, construction versus inventory remained relatively high at 5.0%, dropping only 20 basis points from the 5.2% rate in the first quarter. All of this contributed to the annual absorption rate remaining in negative territory at a still-low -4.3%, although better than the -7.5% in the first quarter.
NIC’s conclusion was that it will “likely take more time to see broad, nationwide improvement to the levels prior to the onset of the pandemic.” This was exactly what our analysis produced last October and November when analyzing historical NIC data. The industry would need consistent quarterly increases of 150 basis points for six straight quarters to get back to pre-pandemic levels by the end of 2022. As was seen by the second-quarter performance, that will not be easy to do, especially if new developments start to pick up speed as people think move-ins will want the latest in post-pandemic design changes. We are not so sure about that.
Our analysis also showed that the third quarter was the only quarter each year that consistently posted increases in occupancy, and we have just entered the third quarter. Brookdale Senior Living was one company that definitely beat the NIC stats, with an increase in average occupancy from the first to second quarter of 90 basis points. What’s better is the momentum, with end-of-May occupancy increasing by nearly 100 basis points to 72.6% at the end of June, and month-end from March to June the increase was 200 basis points. If they get the historical third-quarter push, they may really be on the road to recovery.
