HOUSTON – (By Dale King, Realty News Report) – Occupancy rates at seniors housing facilities declined sharply in 2020 in Texas and across the nation, according to the Colliers 2020 Year-End Seniors Housing & Care Research & Forecast Report.
The seniors housing industry “experienced devastating effects from the COVID-19 pandemic,” Colliers said.
Occupancy at U.S. skilled nursing facilities in December 2020 reached its lowest level since data have been collected, 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.
However, improvement is expected in 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.”
The performance in the seniors assisted living and independent living sectors also slipped in last year with a decline in occupancy in Texas to 76.5 percent at the end of 2020, down from 83.8 percent at the end of 2019, Colliers reported.
In Texas, the seniors housing industry was hit with double blows.
“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
Houston is a leader in senior housing construction, Colliers reported.
“Houston had 2,529 (senior housing) units under construction in Q4 2020, third highest 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 has a healthy senior residential construction ranking.
While construction costs in Texas generally “are still lower than the national average, the highest construction costs among Texas major metros are in Houston, where mid-level assisted living projects range from $168 to $268 per square foot while mid-level independent living projects range from $146 to $221 per square foot,” Colliers said.
Looking specifically at Houston at year-end 2020, the Colliers report lists the following statistics for the assisted living and independent living segments of the senior housing market: 175 properties, 21,429 units, 76.5 percent stabilized occupancy and 2,529 units under construction.
Year-end 2020 nursing care statistics in Houston listed 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 1 among all types of apartment investments. A recent article by Price Waterhouse Cooper says developers and investors ‘have pivoted to other property types moving into 2021, including fulfillment centers, warehouses, single-family rental properties and medical office buildings,” the Colliers report said.
However, two reports from October 2020 cited by Colliers indicate that this turn toward other property types may be short-lived, and the seniors housing industry will be favored in the long-term.
Some 10,000 Baby Boomers turn 65 every day – a statistic 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, a San Clemente, Calif.-based firm. “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