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enior living’s memory care sector, which is de- signed for residents with Alzheimer’s disease or other forms of dementia, provides an integral service – and one that appears likely to only grow in importance in the coming years.
The chief reason is an unfortunate one: the growing
numbers of Americans contending with memory-related challenges. Omar Zahraoui, principal, research and analyt- ics, National Investment Center for Seniors Housing & Care (NIC), said an NIC analysis found that approximately one in nine Americans aged 65 and older has Alzheimer’s or some other form of dementia. By 2030, NIC expects there to be an estimated 8.2 million older Americans with some form of dementia. NIC tracks the largest 99 markets in the country, and it
found that memory care’s occupancy rate fell from 83.2% to 73.8% – from “peak to trough” – at the worst of COVID-19. Demand was a factor in the drop in occupancy rate as some family members thought it safer to keep their loved ones at home, but other factors also were powerful, said Beth Mace, chief economist, NIC. “There was a significant impact from COVID on the occupancy rate, and that stems from operators themselves choosing to limit the number of people that were moving into the property because they didn't want to risk contagion with the existing residents,” Mace said. “And then there were also regulatory rules for senior housing that affected the occupancy rates.” However, memory care occupancy rates have since recov-
ered to 81.9%, according to the NIC. “Memory care was the first segment to fully recover in
terms of occupied units and a return to pre-pandemic oc- cupied stock,” Zahraoui said. Mace added, “The pandemic really affected occupancies
in memory care, as well as in assisted living and independent living, but great strides have been made since the worst days of the pandemic.”
Demand Rebounds as COVID Recedes The initial drop in occupancy rates meant that there was pent-up demand as the pandemic’s impact lessened. Zahraoui said occupancy and demand have improved at a faster pace compared to pre-pandemic levels, though it is difficult to project if that will continue in light of the macro challenges of labor shortages and inflation. “So far, though, the demand improvement and occupancy
gains have been notable,” he said. “Both macro and micro dynamics for memory care trends suggest strong fundamen- tals for the sector.”
On the supply side, Mace said, “There's been a significant
slowdown in construction of memory care properties and the number of units under construction.” In fact, Mace said that 15% of the memory care market inventory was under construction in the second quarter of 2016 – today that number is just 5.3%. “That slowdown happened before COVID, and there was
a bit of an oversupply that was really probably happening at some point in memory care, and that's not happening today as much,” Mace said. “And as a result of that growth in inventory, the number of new units that were coming into the market during COVID also slowed pretty sharply because of that slowdown that we've seen in the prior years.” Although the occupancy rate has not completed its full
rebound, Mace noted that the growth in total units – even if modest in recent years – means more people are living in memory care than ever before. “There's never been more people in memory care units than there is today – the number of occupied units is at its all-time high,” Mace said. “That speaks to the demand.”
Challenges Center on Operators Despite the positive occupancy signs in the memory care market, the field faces an array of challenges. Jeff Frum, senior vice president of sales and marketing,
Silverado, said one limiting factor in the memory care market’s success is the high number of quality operators. Before the pandemic, he said, many investors identified an opportunity to build additional beds to meet the demands of the anticipated sharp growth in the number of older people in the U.S. “The demographics penciled out for an optimistic future in memory care,” Frum said. Then the pandemic arrived. “The industry was tested by a refining fire during the pan-
demic and quality operators, like Silverado, came through this experience with a stronger resolve than ever to serve this vulnerable population,” Frum said. “Many operators didn’t possess strong competencies in the clinical and behavioral complexities of advancing dementia complicated by the CO- VID restrictions imposed upon us by the CDC [Centers for Disease Control and Prevention] and local health authorities and couldn’t deliver the financial returns for their owners.” As a result, Frum said, he has seen attempts to increase
occupancy from some operators by reducing rates or offering rate locks and waiving administrative fees upon move-in. “Ultimately, these are unsustainable strategies in the face
of rising economic costs of labor, building maintenance and supplies from inflationary pressures and rising interest rates,” Frum said.
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