Recession-Proof REITs: Senior Housing Demand Bounces Back After Two Catastrophic Years

Abstract

Recession-Proof REITs: Senior Housing Demand Bounces Back After Two Catastrophic Years Few places seemed more risky during the early, pre-vaccine peaks of the Covid-19 pandemic than nursing homes and senior housing facilities. Like many senior housing communities, the business struggled during the pandemic to bring in new residents to fill empty apartments when residents either passed away or moved to facilities offering more medical care. About 36% of senior housing properties experienced Covid deaths in 2020, according to the National Investment Center for Seniors Housing and Care. Occupancy fell to 78.8% for senior housing facilities in 2020, and closer to 75% in some segments of the space, according to NIC. The overall number has crept back to 81.4%, but still has room to grow before reaching pre-COVID occupancy levels of 87.6%. Executives at Enlivant and Belmont Village Senior Living, two businesses with multi-state portfolios, predict they'll exceed pre-Covid occupancy levels in 2023. Steve Blazejewski, a senior portfolio manager at PGIM, Prudential Financial's asset management arm, says his senior housing portfolio is already seeing higher occupancy and revenue than before Covid. "Compared to multifamily, for example, senior housing rents can be two to three times as high. That creates a fairly substantial income return." Those returns lead to high-yielding dividends for many of the largest REITs focused on senior housing, including Ventas, Sabra Health Care, and Omega Healthcare. Nominal spending on senior housing increased by 76.6% from 2005 to 2020, despite a relatively small generation aging into the senior homes demographic during that time.