According to a new report from investment banking firm Ziegler, based on information provided by NIC, the LPC/CCRC market is on the rebound. Not that it had too far to rebound from, however.
Not-for-profit and entrance-fee LPCs/CCRCs (we will refer to them all as CCRCs) had average occupancy between 90% and 92% in the 99 primary and secondary markets for the 10 years prior to the pandemic. Rental CCRCs were not too far behind but started to diverge (trend lower) between 2014 and 2015, according to the data. With the onset of the pandemic, all forms of CCRCs, whether not-for-profit, for-profit, rental or entrance fee, saw similar drops in census that were seen across the industry and all property types, but not as bad and the entire sector started at a higher occupancy level. But census is now rising, and has been since the bottom early in 2021.
In the fourth quarter of 2021 all CCRCs had an average occupancy of 85.7%, but entrance-fee communities were at 88.0% versus 81.7% for rental CCRCs. Why? One reason is that those who have moved into an entrance-fee CCRC have a much larger financial reason to stay, whether the entrance fee is refundable or not. It is most likely they have made more of a commitment to this type of retirement living. Or, as the name Life Plan Community implies, they are planners and plan to stay.
Another reason why entrance-fee CCRCs have seen a higher occupancy rate than rentals is because EF CCRCs have, on average, a higher percentage of independent living units. That resident population is generally younger and healthier than those in assisted living and memory care. Rental CCRCs have a higher proportion of these unit types than do entrance-fee communities, which means a frailer population and higher resident turnover.
While it is still too early to say the pandemic is behind us, according to the NIC numbers the Pacific region’s entrance-fee communities came out on top with an average 90.9% occupancy in the fourth quarter. This compares with 83.9% for rental CCRCs. The Northeast, which was hammered early on by COVID-19, was second highest with 89.7% for entrance-fee communities, and 84.5% for rentals. Hopefully, the rest of the property types will start to see census numbers like this by the end of the year, or early 2023.
