ANNAPOLIS, Md. — The occupancy rate for seniors housing properties in the third quarter held steady, even as asking rents increased, according to the National Investment Center for Seniors Housing and Care (NIC), the industry’s main data tracking agency.
NIC’s data is gathered from more than 14,000 properties across 140 metro markets nationally.
The average occupancy for the quarter was 89.8 percent for seniors housing, which includes independent living, assisted living and memory care. That number was identical to the average occupancy over the last three years, and an increase of 10 basis points from the previous quarter.
From a historical perspective, the average occupancy in the third quarter was 290 basis points above the industry’s cyclical low of 86.9 percent during the first quarter of 2010.
Independent living properties led the industry in occupancy rate, with an average of 91.1 percent, an increase of 20 basis points over the prior quarter. The average occupancy at assisted living properties trailed at 88 percent, the same as the previous quarter but a drop of 20 basis points from the year prior.
Healthy Tenant Demand
Although occupancy was largely unmoved, absorption stayed positive as the market successfully took on new supply. Annual absorption was 2.5 percent as of the third quarter, increasing over both the previous quarter (2.4 percent) and previous year (2 percent).
“It was a very active quarter for independent living,” says Beth Burnham Mace, chief economist for NIC. “Nearly 2,500 units were absorbed on a net basis, the most in a single quarter since NIC’s data collection began in 2006. Inventory grew at a lesser 2,158 units and below the record pace of 3,268 units in early 2008. As a result, occupancy improved to 91.1 percent.”
For assisted living, inventory growth exceeded absorption for the fourth consecutive quarter, causing the slight occupancy drop from year-earlier levels.
Developers Dial Back
Construction in seniors housing slowed slightly from its feverish pace of the second quarter of 2016, when it hit a high of 6 percent as a share of existing inventory. While it dropped to 5.8 percent in the third quarter, that was still 20 basis points higher than the same period a year earlier.
The construction rate promises to slow further, as the industry posted its weakest level of new starts in nearly two years. Seniors housing construction starts during the third quarter preliminarily totaled 4,168 units, which included 1,525 independent living units and 2,643 assisted living units. On a four-quarter basis, starts totaled 17,522 units, the weakest pace since the fourth quarter of 2014.
Asking rents during the third quarter saw a sharp increase, posting 3.8 percent year-over-year growth. This was 60 basis points higher than the previous quarter
“This was the fastest growth rate for asking rents since 2007 — nearly 10 years ago,” says Chuck Harry, NIC’s chief of research and analytics. “From year-earlier levels, growth was fastest for independent living properties, whose asking rents increased by 4.2 percent compared to the 3.2 percent gain seen in assisted living properties.”
— Jeff Shaw