Senior Housing Property Lease-Up is Taking Longer in Recent Years
January 25, 2023
One of the key indicators that helps to determine the future profitability of a housing project is the pace of senior housing property lease-ups and initial move-ins.
During a lease-up pre-leasing period in the senior housing market, operators work to convince seniors to commit to leasing before the property is move-in ready. The goal is to quickly build occupancy rates as high as possible until they reach stabilization, which is benchmarked at 90%. However, this has proved more difficult for operators to achieve in recent years.
Why Are Senior Housing Property Lease-ups Important?
- The promise of stabilized occupancy. When occupancy rates rise as fast as possible, operators can have 90% of units filled with seniors living on the property the day it opens for business.
- Senior tenants appreciate the perks. To be able to live in a brand new unit as the first resident is a hard-to-come-by opportunity. Many lease-up deals come with incentives as well, such as limited free rent cash bonuses, limited free parking, or waived move-in fees.
- Rent-paying tenants equate to cash flow. When seniors sign leases before the property opens, operators can cover overhead and other expenses with incoming rental payments.
- Lease-up is “sticky.” Getting that initial occupancy rate can reward the operator with longer stays and healthy resident retention over time.
Senior Housing Industry Trends: Key Findings
Senior housing trends indicate that achieving a robust lease-up pace and stabilization of occupancy is the most difficult aspect of developing properties in the current economic environment. This is due in part to the impact of the COVID-19 pandemic, which has exacerbated the pre-pandemic decline of the average senior housing property lease-up pace and made it more difficult for properties to break the 90% campus occupancy benchmark.
In addition, the percentage of properties that are failing to exceed 80% campus occupancy since opening has greatly increased in recent years. For properties that opened prior to 2017, the 80% campus occupancy benchmark represented less than 3% of properties. One in ten properties that opened in 2017 has failed to break 80% occupancy since opening, almost one-quarter of properties that opened in 2018, almost four in ten properties that opened in 2019, and over half of properties that opened in 2020.
The lease-up rate variance by geographic region is mild, even though construction activity is still slow in most markets.
When it comes to the type of senior housing, Majority Nursing Care (NC) properties are leasing up at the fastest rate, followed by Majority Assisted Living (AL) properties. Majority Independent Living (IL) properties are experiencing the lowest lease-up rates.
Interested in Learning More?
Now more than ever, the actionable data provided by NIC MAP Vision can help you stay informed. Trusted by 5,000+ customers and built exclusively for the seniors housing and care sector, NIC MAP Vision provides comprehensive nationwide supply & demand metrics on 35K+ properties, with over 15 years of comprehensive, time-series market data at the metro level.
If you want clarity around improving senior housing property lease-up rates in the current economic environment, talk with a product expert today to learn more about how our rate and occupancy data can help support your business and save you time in an increasingly competitive market.
NIC MAP Vision gives operators, lenders, investors, developers, and owners unparalleled market data for the seniors housing and care sector.