Senior housing occupancy stalled during the second quarter of 2013, despite a rise in construction activity and a slow rent growth, according to NIC MAP data from the National Investment Center.
Overall, the average occupancy rate for senior housing properties in the second quarter was 89%, which NIC notes as a decrease of 0.1 percentage points from the prior quarter and a 0.4 percentage point increase from a year earlier.
This period also marked the second quarter in a row with flat to slightly declining occupancy after consecutive quarterly gains since the first quarter of 2010. While the recovery in occupancy has stalled, it remains 2.1 percentage points above its cyclical low of 86.9% during the first quarter of 2010.
For independent and assisted living properties, occupancy averaged 89.2% and 88.7%, respectively, during the second quarter of 2013. Compared to the prior quarter, independent living occupancy declined by 0.2 percentage points, while assisted living remained unchanged.
Nursing home occupancy also suffered a modest decline of 0.4 percentage points compared to the previous quarter, averaging an occupancy of 87.6% for the second quarter.
“While assisted living outperformed independent living in terms of occupancy this quarter, assisted living occupancy could face more downward pressure in the near-term as its construction activity continues to rise,” said Mike Hargrave, NIC’s chief market & data strategist.
Annual asking rent growth slowed to 1.8% during the second quarter, which was driven primarily by independent living properties, according to Chuck Harry, NIC’s managing director and director of research and analytics. Compared to the same period in 2012, asking rent decreased 0.2 percentage points.
The annual absorption was 1.8% for the second quarter, down from 2.2% in the previous quarter and also below the second quarter of 2012 reading when absorption was 2.4%.
As for construction, current senior housing construction as a share of existing inventory was 2.8% for the quarter—a modest 0.1 percentage point gain compared to the previous quarter.
The spread between annual absorption and inventory growth is at its lowest point since the fourth quarter of 2010, noted 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 further,” Harry said. “A compressing delta between these measures would challenge continued occupancy recovery.”
Written by Jason Oliva
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