Matt Valley
ANNAPOLIS, MD. — The occupancy rate remained essentially flat during the first quarter of 2013 in the seniors housing industry, while the pace of annual rent growth accelerated slightly and overall construction activity rose. The mixed bag of results comes from NIC MAP, a data and analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC).
Overall, the average occupancy rate for seniors housing properties in the first quarter of 2013 was 89.1 percent, unchanged from the prior quarter and a 0.8 percentage point increase from a year earlier.
The first quarter of 2013 marked the first time since the second quarter of 2010 that the average occupancy rate in seniors housing failed to rise. While the recovery in occupancy stalled, it remains 2.2 percentage points above its cyclical low of 86.9 percent during the first quarter of 2010.
The occupancy rate for independent living properties and assisted living properties averaged 89.3 percent and 88.8 percent, respectively, during the first quarter of 2013. Compared to the prior quarter, independent living occupancy rose by 0.2 percentage points, while assisted living occupancy declined by 0.2 percentage points.
The occupancy rate for independent living is now 2.5 percentage points above its cyclical low, while the occupancy of assisted living is 1.9 percentage points above its respective cyclical low.
“We had been seeing independent and assisted living occupancies moving in tandem during the past year,” says Mike Hargrave, NIC’s chief market and data strategist. “Going forward, we may begin to see a divergence, as inventory growth headwinds have been developing for assisted living, while construction in independent living remains comparatively tempered.”
During the first quarter of 2013, seniors housing’s annual asking rent growth accelerated to 2.3 percent, and was 0.9 percentage points above its pace one year earlier during the first quarter of 2012.
“While seniors housing rent growth overall accelerated, its acceleration was driven by assisted living properties. Annual rent growth in assisted living properties accelerated 40 basis points, while the pace of annual rent growth in independent living properties remained essentially flat,” says Chuck Harry, NIC’s managing director and director of research and analytics.
Seniors housing’s annual absorption rate was 2.1 percent as of the first quarter of 2013, compared to 2.3 percent during the fourth quarter of 2012 and 2.2 percent during the first quarter of 2012.
“While the pace of annual absorption continues to outpace that of annual inventory growth, the delta compressed this quarter as absorption slowed,” explains Harry. “Based on the construction pipeline, inventory growth will likely begin to accelerate modestly in the near term, which may cause the delta to compress yet further.”
In the first quarter of 2013, the seniors housing annual inventory growth rate was 1.2 percent, which is near where it has oscillated since the fourth quarter of 2011. Current construction as a share of existing inventory for seniors housing was 2.5 percent, which is 0.2 percentage points above that of the previous quarter.
The occupancy rate for the nursing care segment stood at 88 percent in the first quarter of 2013, which is a decrease of 0.1 percentage points from the fourth quarter of 2012. Nursing care’s annual inventory growth was -0.2 percent in the first quarter of 2013, continuing the established trend of slightly declining inventory growth.
Private pay rents for the sector grew 2.8 percent year-over-year in the first quarter, which is unchanged from the pace reported in the fourth quarter of 2012.