The just released 3Q2021 NIC Lending Trends Report shows issuance of new senior housing construction loans jumped in the third quarter of 2021. The increase occurred despite challenges facing new development such as supply chain disruptions, high demand, and rising prices for materials, services, and labor. This indicates that keen interest in new construction and development is returning, reversing the slowdown in lending activity seen earlier in the pandemic.

The quarterly report, available for free to NIC’s constituents courtesy of NIC Analytics, currently tracks over $86.8 billion in senior housing and nursing care loans. The report tracks senior housing construction loans, mini-perm/bridge loans, and permanent loans over five years, from mid-2016 through third quarter 2021.

Key Takeaways

• The volume of construction loans closed increased for senior housing in the third quarter, showing that interest in construction projects is returning following a pause seen earlier in the pandemic. On a same-store, quarter-over-quarter basis, the increase was 45.0% for senior housing. Construction loans closed for nursing care were also elevated in the third quarter, although new nursing care construction loans closed came in 25.1% lower on a same-store basis from second quarter 2021. It’s noteworthy, however, that construction lending for skilled nursing was about 15% of the level seen for senior housing.

• Nursing care also had strong new mini-perm/bridge loans issued in the third quarter, increasing by 27.2% on a same-store, quarter-over-quarter basis from second quarter 2021 and moving back toward its peak of nearly $644 million in fourth quarter 2020. Conversely, the issuance of mini-perm/bridge loans for senior housing continued to edge lower from the peak in fourth quarter 2019.
• Delinquent loans continued to decline for both senior housing and nursing care in the third quarter from the pandemic-related high point reached in third quarter 2021. Delinquent loans, which include loans in forbearance for some lenders, were 1.0% of total loans in the third quarter for senior housing, the lowest share since first quarter 2020 when delinquencies stood at 0.3%. Nursing care delinquent loans were 1.2% of total loans in the third quarter, down from 1.6% in second quarter 2021. These declines are encouraging signs of continued recovery.

These data are not to be interpreted as a census of all senior housing and skilled nursing lending activity in the U.S., but rather reflect lending activity from participants included in the survey sample only.

The NIC Lending Trends Report for fourth quarter 2021 is scheduled for release in mid-May 2022.

Interested in participating? The NIC Lending Trends Report helps to deliver on NIC’s mission to enable access and choice by further enhancing transparency of capital market trends in the senior housing and care sectors. We very much appreciate our data contributors. This report would not be possible without them.

If you would like to participate and contribute your data, please email us at analytics@nic.org. As a thank you for providing data, data contributors receive this report early before publication on the website. The information provided as part of the survey will be kept strictly confidential. Individual answers will be combined with the answers of all other respondents. Data acquired from this survey will only be reported in the aggregate, and therefore, the resulting aggregated data will not be attributed to you or your company upon distribution.

The Labor Department reported that nonfarm payrolls rose by 467,000 in January 2022. This was stronger than market expectations of an increase of 125,000 and occurred despite the impact of Omicron on the economy. Many analysts had expected the employment numbers to be negatively affected by absenteeism and self-isolation driven by the Omicron virus wave. January’s gain compared relatively favorably to the average monthly gain of 555,000 seen in 2021 and will support the Federal Reserve’s intention of raising interest rates as soon as March. Revisions added 709,000 to total payrolls in the previous two months. Nonfarm payrolls have now increased by 19.1 million since their pandemic trough in April 2020 but are still down by 2.9 million or 1.9% from their pre-pandemic level in February 2020.

Concerns about rising wage costs and inflation are further supported by this report. Average hourly earnings for all employees on private nonfarm payrolls rose by $0.23 in January to $31.63, a gain of 5.7% from a year earlier.

In a separate survey conducted by the BLS, the jobless rate edged up by 0.1 percentage point to 4.0% in January 2022, down 2.4 percentage points from year-earlier levels. The jobless rate is now 0.5 percentage points above the pre-pandemic level of 3.5% seen in February 2020, and well below the 14.7% peak seen in April 2020.

“Skilled Nursing occupancy has leveled off in the 75% range since July, according to the latest data through November 2021. This suggests the Delta variant had an impact as the labor crisis intensified, which limited the ability to accept new patient admissions.”

– Bill Kauffman

NIC MAP^® data, powered by NIC MAP Vision, released its latest Skilled Nursing Monthly Report on February 3, 2022. The report includes key monthly data points from January 2012 through November 2021.

Here are some key takeaways from the report:

Skilled nursing property occupancy was flat in the month of November, ending the month at 75.7% after increasing 28 basis points from September to October. Occupancy has been relatively flat since July, and is now 381 basis points above the low point reached in January 2021 (71.9%). It was expected that admissions to skilled nursing properties would increase at a faster pace in 2021, but the COVID-19 Delta variant over the summer months posed a challenge to operators as did staffing shortages across the industry. Most recently, staffing shortages have caused many operators to limit patient admissions because they are unable to hire additional caregivers. The Omicron variant is expected to cause additional pressure on occupancy in the winter months. Occupancy remains very low compared to February 2020 pre-pandemic levels of 86.0%.

Medicare revenue mix ended November at 20.3%, which was a 23 basis point increase from October. However, it is down from its pandemic high of 24.6% set in January 2021. The revenue mix has increased 65 basis points since September, which in part is likely a result of the increase in Medicare rates to skilled nursing properties for fiscal year 2022. That increase was implemented in October. However, since January of 2021, the longer-term downward trend in Medicare revenue mix continued as fewer COVID-19 cases in properties have resulted in less need for utilizing the 3-Day rule waiver and per day reimbursement for COVID-19 positive patients.

Managed Medicare patient day mix decreased slightly (8 basis points) from October to 7.2% in November and has oscillated in that range since June 2021. However, it is down 48 basis points from its high set in February (7.7%), which suggests lower patient admissions from managed Medicare given the increase in overall occupancy within the same timeframe. On the other hand, it has increased 214 basis points from the pandemic low of 5.1% set in May 2020 when states around the country implemented a suspension of elective surgeries, which had a direct impact on lower hospital referrals to skilled nursing properties.

Medicaid patient day mix decreased for the second month in a row, falling 51 basis points from October to end November at 66.2%. This decline, coupled with the fact that occupancy held steady in November, suggests that Medicare patient days were responsible for preventing a month-to-month decline in occupancy. However, Medicaid patient day mix has increased 245 basis points from the pandemic low of 63.7% set in January 2021. In addition, Medicaid revenue mix decreased, dropping to 50.3% from 51.6% in October.

To get more trends from the latest data, download the Skilled Nursing Monthly Report. There is no charge for this report.

The report provides aggregate data at the national level from a sampling of skilled nursing operators with multiple properties in the United States. NIC continues to grow its database of participating operators to provide data at localized levels in the future. Operators who are interested in participating can complete a participation form. NIC maintains strict confidentiality of all data it receives.

Interested in learning more about NIC MAP data? To learn more about NIC MAP data, powered by NIC MAP Vision, and about accessing the data featured in this article, schedule a meeting with a product expert today.

NIC MAP Vision clients, with access to NIC MAP^® data, attended a webinar in mid-January on key seniors housing data trends during the fourth quarter of 2021. Findings were presented by the NIC Analytics research team. Key takeaways included the following: 

Takeaway #1: Senior Housing Occupancy Up 2.3 Percentage Points from Pandemic Low  

• Occupancy jumped one full percentage point to 81.0% in the fourth quarter due to favorable supply and demand conditions. From its low point of 78.7% in the first and second quarters of 2021, it is up 2.3 percentage points.  However, it remains 6.4 percentage points below its pre-pandemic level of 87.4%. 
• For seniors housing, inventory growth continued to slow to only 2,910 units in the fourth quarter.  This was the fewest units added to inventory since the first quarter of 2019.  For further perspective, its pre-pandemic 10-year quarterly average was 3,333 units per quarter.  
• Inventory growth has generally trended down from its high point of 6,100 units in mid-2019. It’s likely to continue to do so due in the near term to a slowdown in starts in 2020 and early 2021.  

Takeaway #2: Record High Demand Occurred in Second Half of 2021 

• The second half of 2021 will be remembered as a time of rebounding demand as it registered the strongest unit improvement of net positive absorption, as measured by the change in occupied stock, since NIC MAP began reporting the data in 2005. 
• More specifically, demand continued to strengthen in the fourth quarter, albeit at a slower pace than in the record-setting third quarter.  Indeed, net absorption continued to recover in the fourth quarter of 2021, increasing by 9,035 units in the Primary Markets, the 2nd strongest unit increase since NIC MAP Vision began reporting the data in 2005. In the third quarter, net absorption totaled 11,994 units.  For both quarters, this equaled 21,029 units.  Combined with the second quarter (3,401 units), net absorption increased by 24,430 units in the last nine months of 2021
• Notably, this is a clear reversal in trend from the loss of 42,129 units during the pandemic in the second, third and fourth quarters of 2020 and the first quarter of 2021.

Takeaway #3: Very Large Chains Saw Most Increase in Occupancy Rates in Fourth Quarter 

• Very large chains (operators with 25 properties or more), have consistently had lower occupancy rates than other chain groupings. Very large chains also incurred the largest occupancy drop related to the pandemic—down 10.1 percentage points. But they have also seen the largest improvement in occupancy since hitting bottom in the first quarter.  In the fourth quarter, the occupancy rate for very large chains was 78.4%, a 3.3 percentage point improvement from its nadir of 75.1% in the first quarter of 2021. 
• Large chains (10 – 24 properties) had the second-best improvement in occupancy rising from 80.3% at its pandemic-related low in the first quarter to 83.2% at year end, a gain of 2.9 percentage points.  Moreover, large chains had the highest fourth quarter occupancy of any of the groupings.
• Single properties were not far behind, however, at 83.0%. 

Takeaway #4: Occupancy Distribution Varies by Market 

• The average occupancy rate for seniors housing in the 31 Primary Markets was 80.1% in the fourth quarter while the median occupancy was 84.6%.  This large difference means that the range of occupancy rates by individual properties is broad and the distribution wide. 
• In the fourth quarter, 14.7% of the Primary Markets properties had occupancy rates above 95% and another 18.4% had occupancy rates between 90 and 95%.  But by market this varies considerably.  
• Conversely, 39.2% of properties in the data base had occupancy rates below 80%. This is better than 41.8% in the third quarter, but well above the 22.3% pre-pandemic.  This cohort includes those properties that opened during a global pandemic and those properties that have slipped in occupancy during this period. This suggests that there are still many operators dealing with properties that have very challenged occupancy rates. 
• The markets with the lowest overall occupancy rates—Houston, Cleveland, and Atlanta—not surprisingly have more than 45% of their properties with occupancy rates below 80% (Houston has 51.1%) and much smaller shares with occupancies above 90%.  Some of this occupancy performance may be due to a higher share of newly opened properties in some markets more than in others.
• San Jose, San Francisco, and Boston in contrast easily have more than one-third of their properties with occupancy rates above 90%, with Boston having 43% of its properties.  Atlanta, by contrast, has 22%.   

Key Takeaway #5:  New Construction Loan Volume Picking Up Again 

• This chart looks at closed construction loan volumes from 2016 through the second quarter of 2021 and is based on NIC’s Lending Trends Report. The full report can be found on our website. 
• The chart mimics the pickup in starts activity that began last year since capital is a requirement and prerequisite for breaking ground on new projects.  
• Indeed, on a four-quarter moving sum basis, starts have turned the corner and are picking up once again after having been on the decline in the immediate aftermath of the pandemic in 2020.    
• For independent living, starts totaled 8,204 units, on a four-quarter sum basis, the most since mid- 2020.  For assisted living, there were 9,648 units started on a four-quarter aggregate basis in the fourth quarter, equating to 2.9% as a share of inventory. For perspective, at its peak in early 2016, it was 6.0%. 
• Third quarter data on lending trends will be out in mid-February. 

Interested in learning more? 

• While the full key takeaways presentation is only available to NIC MAP clients with access to NIC MAP data, you can access the abridged version of the 4Q21 Data Release Webinar & Discussion featuring my exclusive commentary below. 
• View the Abridged Slides Presentation
• To learn more about NIC MAP data, powered by NIC MAP Vision, an affiliate of NIC, and accessing the data featured in this article, schedule a meeting with a product expert today. 

Baby boomers may not be ready for assisted care, but they may be ready for something else. But what? Do they want an active adult-type development with certain amenities? Or is it more about seeking a place that offers a sense of community and a personalized lifestyle?

Thought leaders in the fields of aging and longevity explored the question at the 2021 NIC Fall Conference in Houston during a session aptly titled: “Rethinking Community: Places that Will Attract Future Older Adults.”

For the most part, baby boomers are healthy and don’t feel old. They aren’t looking for the care-based housing model that they may have experienced vicariously through their parents. They’re not passive. Instead, they ask themselves, “How do I live my next chapter?” Baby boomers want choice, independence, and a place tailored to their preferences.

“The boomers are finally here,” said panel participant Bob Kramer, NIC co-founder & strategic advisor, and founder & fellow at Nexus Insights. “They are looking for places, activities, and programs to help them repurpose themselves to live with satisfaction and purpose.”

The discussion was led by Susan Barlow, co-founder, managing partner and COO at Blue Moon Capital Partners. Other panelists included Ryan Frederick, founder & CEO, SmartLiving 360; Jake Rothstein, founder & CEO, UpsideHōM; and Sara Zeff Geber, founder of LifeEncore.

Kicking off the session, Barlow asked: “What do baby boomers want?”

Kramer put the discussion in context, noting the huge growth in the number of baby boomers, those in the 65-84 age group. “The demographic wind is at our back,” he said. But instead of looking at demand in terms of age and income, he cited a study on rethinking demand in terms of life expectancy. While the industry mostly cares for people in the last five years of life, baby boomers are not yet customers for a care-driven product.

When rethinking demand, developers and investors should consider what consumers can afford. Baby boomers want health and longevity, but they also want to have the dollars to support themselves. They wonder if their lifespan will match their health span, and their wealth span. Kramer noted that NIC’s study on the “Forgotten Middle” shows that a large number of baby boomers will not be able to afford a traditional community.

Kramer emphasized that baby boomers want to avoid assisted living. Instead, they want experiences that make life worth living for the next, as he put it, “8,000 days.”

Panelist Geber observed that baby boomers seek a sense of community. Her work focuses on “solo agers”—those elders, mostly women, without children or those aging alone for other reasons. In fact, one in five baby boomers is childless. This group does well living alone because they’ve created a community or social network of friends and family for support. “They do not want to give that up,” said Geber.

Communities that offer opportunities to remain active and help provide a sense of purpose will attract these boomers. “Solo agers will need senior housing that appeals to the lives they live today,” she said.

Place Matters

Panelist Frederick emphasized that “active adult” is a product type, not a consumer. He authored a book titled, “Right Place, Right Time.” It looks not just at the physical dwelling space but also the individual’s neighborhood, wider community, financial security, physical and mental health, and sense of purpose. He suggested that developers and operators ask themselves: “Are you in the senior housing business, or are you in the business of creating places and services to help people thrive?”

Frederick cautioned senior living providers about the changing competitive landscape. Active adult projects for baby boomers are only a small sliver of housing options. There are multifamily, multi-generational projects. Co-housing arrangements can facilitate a sense of community. Pocket neighborhoods in walkable locations are another option.

Technology will play a role. UpsideHōM is a technology platform that connects people to housing and services that have been vetted by the company. “Technology can drive positive experiences,” said panelist Rothstein.

The UpsideHōM platform connects older adults to age-diverse apartment communities. The older adult is assigned a personal assistant or navigator to help manage day-to-day life and maintain community connections. Services are tailored to the individual. “No one size fits all,” said Rothstein. Seniors can get food delivered or transportation, but only if they want or need it. “Think about how to customize service and support,” he suggested.

What does this mean to the investor? Kramer noted that it’s crucial to understand the customer and take a wider view. The demand pool of baby boomers is broad, but thin for any particular type of development. Product categories will be highly segmented based on the personal preferences. “This is about the consumer and what they want,” said Kramer.

Moderator Barlow asked the panelists about market risks and what’s ahead.

Frederick noted that the world is more complicated, and people have more choices. “Housing for older adults will be a matter of trial and error,” he said.

Rothstein believes technology will be essential to create a meaningful end-user experience. “We have to be thoughtful about using technology to drive meaningful engagement,” he said.

Solo agers want to continue their lifestyle and may consider a congregate living arrangement if it is presented to them in a way that makes them feel comfortable. Small neighborhoods make more sense for them than big high-rise buildings.

The panelists agreed that the senior living market for baby boomers will be fragmented and diverse. Innovative approaches and new ways of thinking will be needed to meet the demand. “Huge change is coming to our industry,” said Kramer.