HOUSTON – (By Dale King, Realty News Report) – Occupancy rates at senior housing facilities fell sharply in 2020 in Texas and nationwide, according to the Colliers 2020 Year-End Seniors Housing & Care Research & Forecast Report.
Colliers said the senior housing industry “experienced devastating effects from the COVID-19 pandemic.”
Occupancy at U.S. skilled nursing facilities in December 2020 reached its lowest level since data collection began, ending the year at 71.7 percent, down from 83.8 percent in the fourth quarter of 2019, according to the National Investment Center for Seniors Housing & Care (NIC).
Nonetheless, improvement was expected for 2021.
“New COVID-19 cases and mortalities are dropping steadily due to the vaccine’s reach and effectiveness in skilled nursing settings,” said Beth Burnham Mace, NIC’s chief economist. “As vaccination rates rise, occupancy rates are likely to increase in the coming months.”
Assisted living and independent living sectors also declined last year. Colliers reported that overall occupancy in Texas for these segments was 76.5 percent at the end of 2020, down from 83.8 percent at the end of 2019.
In Texas the senior housing industry faced compounded challenges.
“As you know, our portfolio has a heavy concentration in Texas. And at Brookdale, we needed to manage through successfully, not just one 100-year pandemic. But we needed to manage through two 100-year issues with the extreme weather in Texas. So my expectation is that we probably will have a little disruption in Texas,” said Lucinda Baier, CEO of Tennessee-based Brookdale Senior Living. “I think the important thing to note is that we have seen move-ins improve …”
Seniors Housing Construction Hot in Houston
Colliers identified Houston as a national leader in senior housing construction.
“Houston had 2,529 (senior housing) units under construction in Q4 2020, the third-highest total in the U.S. behind New York and Washington, D.C. Houston is the only Texas market in the top five under-construction metros,” Colliers reported.
Dallas also ranked well for senior residential construction activity.
Although construction costs in Texas generally remained below the national average, Colliers noted that Houston has some of the highest construction costs among major Texas metros. Mid-level assisted living projects in Houston ranged from $168 to $268 per square foot, while mid-level independent living projects ranged from $146 to $221 per square foot.
At year-end 2020, Colliers listed the following figures for Houston’s assisted living and independent living segments: 175 properties, 21,429 units, 76.5 percent stabilized occupancy and 2,529 units under construction.
Year-end 2020 nursing care statistics for Houston included 138 properties, 17,332 units, 60.3 percent stabilized occupancy, and no new units under construction, Colliers reported.
Investor Outlook
“For the past seven years, senior housing has been ranked number one among all apartment investment types. A recent PricewaterhouseCoopers article notes developers and investors have pivoted into other property types heading into 2021, including fulfillment centers, warehouses, single-family rentals and medical office buildings,” the Colliers report said.
However, Colliers cited two October 2020 reports suggesting that the shift toward alternative property types may be temporary and that senior housing will remain attractive over the long term.
Demographics remain a key driver: roughly 10,000 Baby Boomers turn 65 every day, a trend investors cannot ignore.
“Deal flow continued to be light in Q4 as COVID spiked, operators continued to keep their heads down, and both underwriting and diligence were complicated by the pandemic,” said Mark Lamb, Chief Investment Officer of CareTrust REIT, based in San Clemente, Calif. “However, we have seen an uptick in deal flow over the past few weeks, and based on conversations we are having with the brokerage community, we anticipate an increase in opportunities over the coming months as operators navigate their way out of the way this COVID spike.”
March 23, 2021 Realty News Report Copyright 2021
File: Seniors Housing Occupancy Declines
Photo: credit: Ralph Bivins, Realty News Report 2021