NIC MAP Vision, the senior housing industry’s leading provider of data and analytics, and the official Data & Insights Partner of Argentum, recently released its Senior Housing Market Outlook: Opportunities from an emerging supply and demand imbalance. The report covers key trends, including the market’s surging fundamentals driven by demographic, economic and sectoral patterns; the status of investment activity that presents challenges and opportunities to stakeholders; and bright prospects, signaling a strong future for the senior housing sector. Specifically, the report emphasizes a critical shortage of senior housing developments amidst rapidly growing demand, identifying the need for immediate action. According to the Senior Housing Market Outlook, abundant opportunity exists for senior housing stakeholders, especially operators, to leverage current market trends for continued growth and success.
Key Findings and Market Optimism
The 80+ population is projected to grow rapidly over the next 25 years, with nearly 16 million “new” 80+-year-olds by 2050. Due to this burgeoning population of aging Americans, we are seeing unprecedented senior housing absorption rates. The NIC MAP Vision Senior Housing Market Outlook revealed that in 2023, absorption rates doubled the average of any pre-pandemic four-quarter period, and 1Q24 showed absorption up more than 60% year-over-year. Absorption is outpacing supply growth, indicating a significant unmet demand for senior housing — and signaling promising opportunity for the industry overall. In addition to historic absorption rates on the heels of COVID, occupancy rates are also showing rapid recovery after the pandemic, currently within 1–2% of pre-pandemic levels. Furthermore, BLS data shows labor markets are normalizing for senior housing operators, which contributes to operational efficiency and ultimately margin expansion. These are all reasons for operators to feel optimistic about the future.
The U.S. aging population has never grown as fast or been as large as it is right now, and this unprecedented demographic megatrend is only going to continue. The biggest surge of the age wave is yet to come. In fact, to meet the demand of the growing senior demographic, development will need to progress at an unprecedented pace. The current annual development pace is 26,000 units, and the highest inventory growth we’ve seen in the 21st century is 56,000 units. Starting in 2025, we need to develop just under 102,000 units per year to meet the expected need by 2030. This explosive growth means the senior housing industry will expand for decades to come, presenting a generational opportunity for industry stakeholders.
Positive Operating Margins and Cost Management Insights
COVID drastically reduced the labor pool in most industries, including senior housing. Many issues overwhelmed operators, who had to resort to expensive staffing agencies to fill critical roles, creating challenges with service quality as well as inefficiencies. But, as NIC MAP Vision’s Senior Housing Market Outlook reports, the labor markets are normalizing, with aggregate industry staffing at 5% above pre-pandemic levels. This rebound helped to improve operating efficiency while also addressing service quality, which is at the forefront of the decision-making process for prospective residents and their families. On top of the recent return to normalized staffing levels, the market is also seeing rent growth outpacing labor costs and inflation, expanding once-compressed margins. These trends appear set for the foreseeable future as demand growth continues to significantly outstrip supply growth. All these factors signal robust demand and positive operating revenues for years to come.
Strategic Growth and Development Opportunities
As reported, operating expenses grew materially from 2020 through 2022, compressing margins, but as labor markets stabilized in 2023 and inflation slowed, margins began to recover right as demand accelerated. This positive trend is putting cash back onto the balance sheet at a time when it’s needed most – to invest in the future. In addition, senior housing construction starts are nearing lows not seen since the depths of the Great Recession in 2008. Operators have good reason to feel optimistic about revenue growth in the near term, and, with low levels of construction — caused by high interest rates and limited capital availability, as well as multi-year pre-development and construction timelines — the opportunity for new development has never been so high. In short, supply growth will take years to stabilize and demand growth will skyrocket as the first Boomers turn 80 in 2025, putting operators and their investment partners in an ideal position to embark on new development.
Senior housing market fundamentals have improved significantly since 2020. Although senior housing continues to face challenges, history consistently demonstrates the industry’s resilience. Unprecedented demand, insufficient supply, reduced operating costs and dislocated capital are fueling ample opportunity for the senior housing industry and its stakeholders. Operators play a critical role in capitalizing on these trends while addressing the needs of the rapidly growing aging population and fulfilling a critical societal deficit.
For more detailed analysis and insight, take a closer look at NIC MAP Visions’ Senior Housing Market Outlook, a helpful guide for operators making strategic decisions and growth plans.
About the Author: Arick Morton is the CEO of NIC MAP Vision, the trusted, single source for senior housing supply, demand & operational data.
