- Occupancy up quarter over quarter, but down annually
- Absorption increased quarterly and annually
- Average rents rose over the year and over the quarter
- New supply increased over the quarter and year-over-year
- Sales volume still below pre-pandemic levels
Senior Housing (includes IL and AL Majority)
Texas’ 2020 population reached over 29.3 million, an increase of 6.9% over the last five years. The population is forecasted to increase 7.4% between 2020 and 2025, adding 2.2 million residents. The demographic representing the largest segment of population are 5-9 years (7.42%) and 25 to 29 years (7.4%). Seniors 65 and older represent 13.2 percent of Texas’ population, or 3.9 million residents. The population segment with the largest growth between 2015 and 2020 are seniors 70-74 years old, growing 31 percent.
Historic Comparison - Seniors Housing only
Texas Population by Age Cohort
The Texas overall occupancy rate decreased 460 basis points year-over-year, but increased 60 basis points on a quarterly basis. The average monthly rent rose 1.8 percent on an annual basis from $3,762 to $3,831.
Pricing & Sales Volume
Average sales prices for the different senior care sectors experienced a spike in Q1 2021, but continued to decline in Q2. As a result, Texas’s average price per unit fell by 17.4% annually to $105,222 per unit in Q2 2021.
According to Senior Care Investor, Assisted Living (AL) reported the most dramatic decline in prices in 2020. Independent Living (IL), which represents a smaller market, had minimal effects from the pandemic, with only a slight decrease in average price. IL residents stay in the communities longer, are younger and healthier, and therefore the labor costs in those communities are smaller. However, increased construction volumes of IL communities affect the supply and demand in this sector.
Texas Seniors Housing Median Price per Unit
(Seniors Housing & Nursing Care)
Sales volumes increased in the first two quarters of 2021, but are still much lower than pre-pandemic levels. There are more distressed properties coming to the market. Buyers’ interest has declined over the last year, but is starting to pick up again. More buyers are looking for investment opportunities than there are available offerings. Many owners of the struggling facilities are using federal and state aids and are not prepared to sell just yet.
Texas Seniors Housing Sales Volume ($)
(Seniors Housing & Nursing Care)
Senior Care Investor reported an increase in cap rates, as much as 40 basis points to 13.1% for Skilled Nursing Facilities (SNF) in 2020. The average cap rate for AL has dropped by 15 basis points to 7.75% in the last four quarters. The average cap rates for IL communities have barely changed and the reported average is 7.7%.
Except for the Austin metro, all Texas major metros had fewer seniors housing units under construction in Q2 2021 than in Q2 2020. In addition, construction of Skilled Nursing Facilities (SNF) nearly stopped in the last quarter. There were only a few nursing care units under construction in the Dallas metro this quarter.
It looks like construction volume is going to pick up by year-end. There are more sites that are planned and in pre-construction phases now. The majority of these sites have IL, AL and MC units.
Seniors Housing Units Under Construction
Commentary by Elena Bakina, PhD, CCIM
When the COVID-19 pandemic hit in 2020, the Seniors Housing and Care industry had already been experiencing many challenges due to pockets of overbuilding, rising operating costs and labor shortages. During 2020, operational costs and labor shortages grew even higher. Temporary lockdowns and visiting restrictions, in addition to the lives claimed by the pandemic, contributed to the process of unprecedented decline in occupancy in the long-term care facilities and senior living communities. Locked down in their units and unable to have any visitors, seniors felt isolated and often depressed, contributing to a higher mortality rate.
At the beginning of 2021, some COVID restrictions were lifted, and vaccines became available, which brought optimism that the industry would recover. The facilities were able to offer the residents some of their activities once again. Operators implemented new technologies and innovations that helped keep the facilities safe and improve socializing among the residents.
The Senior Living industry has begun to show signs of a slow recovery in Q2 2021 from the pandemic hit last year. There has been a slight rise in occupancy and positive absorption for the first time in a year.
Although Texas markets still have one of the lowest occupancy rates in the country, the job market, access to high-quality healthcare and low cost of living, among other factors, will continue to support population growth in Texas. In addition, the unprecedented vibrant residential real estate market is one of the factors influencing seniors’ decision to move into senior living communities.