These Factors Indicate a ‘Positive Story’ for Senior Living in 2024

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The senior living industry’s occupancy rebound and its demand prospects ahead are two of the biggest indicators that operators will see a better year in 2024.

That’s according to Rick Brace, director of AEW Capital Management’s research group. Brace, who recently authored a report on the senior housing industry’s prospects in 2024, said he is among those feeling optimistic for a full recovery in the industry, particularly within the private-pay sector that AEW focuses on.

According to Brace, demand for senior housing based on the net absorption of units averaged 2.3% between 2010 and 2019. From 2022 and 2023, that rate grew to 4.9%.


“You’ve had this nice recovery in demand, proven by a host of factors, demographics is really only a part of it at this juncture, when you look at the short term,” he said. “So what that’s doing is it’s helping kind of bring that occupancy rate back.”

Brace’s optimism matches the general sentiment of recent attendees of the NIC Spring Conference in Dallas, with 79% of those who took a recent survey indicating an outlook for the industry that is somewhat positive or extremely positive for 2024.

Brace added that after a 900-basis-point drop in occupancy due to the Covid pandemic, the industry is now only 140 basis points below its pre-pandemic levels. An ongoing lull in new construction starts will only add to the growing demand of incoming seniors. At the end of 2023, around 4% of existing inventory, or 43,000 units, were under construction, and around 1.2% of inventory was breaking ground, according to NIC data.


Occupancy has also been on the rise, with Brace’s report indicating that as of 4Q23, primary and secondary markets were averaging 85.8%, with 87% being a stabilized goal.

“At least from a fundamentals perspective, you have a very good base of the situation there,” Brace said.

He added that he expects senior living margins to bounce back in the coming years as occupancy improves.

Brace added he has noticed a “cooling” in labor costs across all sectors. While labor costs are not flat and still increasing, they are doing so at a slower rate than earlier in the pandemic. Because of this, senior housing companies are able to “budget accordingly and have a much better handle” on where they stand in the marketplace, he said. The reduced reliance on agency usage is also promising for the industry.

Another factor leading to Brace’s optimism is the uptick in transaction volume the industry saw closing out Q4, despite 2023 seeing some of the lowest volume in transactions since 2021. According to his report, “public REITs were the most active net buyers along with private owners while institutional capital remained a net seller.”

“One quarter does not make a trend or one data point does not make a trend, but it does feel like there is going to be a little bit more liquidity in the marketplace,” Brace said. “There’s a little bit of stress out there, people are in a situation where they need to sell again. Multiple parts of commercial real estate are in that situation, it’s more being driven by the capital dynamics.”

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