Senior Housing Occupancy Hits Eight-Year Low as New Supply Continues to Outpace Demand
ANNAPOLIS, Md. — Average occupancy for seniors housing properties throughout the United States has fallen to 87.9 percent in the second quarter of 2018, according to the National Investment Center for Seniors Housing & Care (NIC). The rate is the lowest since first-quarter 2010, when it hit 86.9 percent. Assisted living occupancy, already at record lows, also fell further to 85.2 percent.
The industry-wide occupancy slide represents a 40 basis-point drop over the previous quarter, an 80 basis-point drop over the year prior, and a 230 basis-point drop from its recent high of 90.2 percent in fourth-quarter 2014.
NIC, an Annapolis-based, nonprofit data and analytics firm serving the seniors housing industry, tracks occupancy data using the top 31 primary metropolitan U.S. markets. Transaction data is representative of all U.S. seniors housing property transactions of $2.5 million and above.
The silver lining of the low occupancy numbers, according to NIC’s data, is that absorption and rent growth are still positive — 2.4 percent and 2.7 percent, respectively. However, inventory growth was 3.3 percent in the quarter, meaning supply continues to outpace the demand.
“The occupancy rate for assisted living was the lowest since NIC began to report the data in late 2005,” says Beth Burnham Mace, chief economist for NIC. “Inventory growth also set a record, with more than 4,400 units coming online. Demand accelerated from the first quarter’s flu-related weak levels but was not strong enough to offset growth in inventory.”
Preliminary data on construction as a share of existing inventory for seniors housing was 6.3 percent in the second quarter of 2018, 70 basis points below its recent high of 7 percent in the fourth quarter of 2017.
“The seniors housing occupancy rate has trended downward over the past 10 quarters, which is only two quarters short of its 12-quarter downturn during the Great Recession,” says Chuck Harry, NIC’s chief of research and analytics. “Although annual absorption has averaged a solid 2.4 percent during this 10-quarter downturn to date, the total number of seniors housing units absorbed amounts to only 63 percent of the significant and sustained inventory growth during this same period.”
To view the full NIC second-quarter summary, click here.