Entering the final quarter of the year, it seems timely to examine the current trends in senior housing occupancies, identify effective marketing strategies, observe rate trends, and consider the outlook for 2025.
The senior housing sector is experiencing substantial changes driven by the growing need for specialized senior care services and progress in technology and healthcare. A recent report from NIC (National Investment Center) is illustrative.NIC-MAP-Vision_Senior_Housing_Market_Outlook_Report 2025
- Population growth, especially among the 80 plus cohort, generates demand that exceeds current and near term, supply.
- Debt markets and economic conditions generating higher lending rates and higher bond yields, have constricted development allowing existing providers an opportunity for current unit absorption while also, in some cases, constricting needed product updates (capital access constraints not providing sufficient resources for improvements).
- Demand will continue to outpace supply, but the industry will need to get creative to adjust to the actual demand.
- Market rate and affordable units.
- Lifestyle development that caters to a slightly younger 70 to 80 cohort.
- Service enhanced housing that brings more care services on-site to maintain a more chronic disease afflicted population with additional frailty.
TThe evident need for new senior housing developments is clear as demand growth accelerates rapidly. Addressing this demand is essential for providers and organizations aiming to gain a competitive edge in the market. Data from both the Census and Claritas (Custom Targeting and Audience Segments | Claritas LLC) suggest that the wave of an aging population is expected to peak in the latter part of the 2020s, underscoring the pressing need for more senior housing options.
While demand is strong, and occupancies are growing marketing is the difference between how growth is occurring and how stable the growth trend is. In other words, yes demand by demographic is good but how much of occupancy increase realization has occurred (sales) as a result of discounting and incentives.
In 2024, operators of senior living facilities are carefully balancing the need to offer discounts to remain competitive with the imperative to preserve the long-term value of senior living services. Typically, facilities in more challenged markets (overbuilt, aged-out) or facilities with older, less modern units deployed incentives more often than newer providers in expanding markets.
According to NIC, discounts are increasingly used as a marketing strategy. The gap between the listed rates and the rates initially offered “reached new highs” in the second quarter of 2024. The most significant gap was in independent living, with an average difference of 16%, which translates to slightly more than two months of free rent. This is an increase from 1.4 months in June 2023, as reported by NIC data.
The dilemma with discounts is the psychological effect they have on potential residents, over time. Similar to buying a car, if discounting becomes the norm, buyers weigh the purchase decision and timing to commandeer the “greatest” discount. Granted, some of senior living purchase decision-making is influenced by need but among like options in a market, potential residents may gravitate to a location offering the best (perceived) value.
Aside from NIC, a data source on senior housing/senior living marketing I follow closely is BILD. Their recent update on sales activity is interesting. 2024 Senior Living Sales Activity & Conversions Analysis (Q1-Q3 2024) | Bild & Co. (bildandco.com)
- The average senior living community was converting 23.5% of new leads to tours per month, which is the lowest conversion rate since 2020.
- 18% of new leads that inquired through 2023 were HOT, 26% were WARM, and 30% were The other 26% were categorized in another stage.
- On average, senior living communities had 1 hour and 36 minutes of time in the selling zone.
- Overall, in 2024 there was an average of 5% of NEW leads converting to tours, while 23.7% of tours converted to move ins. When accounting for all leads worked (new and established) throughout 2024, only 16.5% of leads converted to tours.
- The average inquiry to move in has leveled out at 6%, a 1% decrease since the beginning of 2023.
- 4% of new leads resulted in a deposit in 2024.
What the above data tells me is that again, demand is good, but communities are still struggling to efficiently capture the demand and are perhaps, becoming too reliant on incentives to fill units.
Later this week, I will re-drop a post on value propositions and marketing that provides perspective on how to create the ideal marketing strategy around pricing, branding, and messaging.
Back in 2008 – 2010, there were many analogous trends to today (post-pandemic, challenging housing market, challenging economy). A post I wrote in 2009 about CCRCs and marketing may have some interest for readers of this post and how the parallels between today and then, are evident. https://rhislop3.com/2009/11/30/ccrcs-ready-set-market/