Assisted living occupancy stumbled during the fourth quarter of 2016, despite healthy demand for senior housing units.
At 87.6%, assisted living occupancy dropped to its lowest level since early 2010, according to the latest data from the National Investment Center for Seniors Housing & Care (NIC). Assisted living occupancy hit 87.9% in the third quarter of 2016 and 88.3% in the fourth quarter of 2015.
The end-of-year drop in occupancy can be attributed primarily to record-breaking inventory growth, Beth Burnham Mace, chief economist at NIC, said to Senior Housing News.
“Largely, [the drop] is a result of supply and demand imbalances,” Mace said. “A fair amount of new supply has been delivered in the past few years, and demand hasn’t been strong enough.”
More than 5,900 senior housing units came online in the fourth quarter of 2016, almost 4,100 of which were assisted living units, Mace said. It was the most active quarter in terms of inventory growth since NIC began collecting data in 2006.
Senior housing annual absorption, a metric for demand, amounted to 2.6% as of the fourth quarter of 2016—another record-high level, Mace noted.
In fact, demand was “very strong” this past quarter, according to Mace.
Still, it’s unlikely that assisted living occupancy will surpass 90% any time soon. In fact, assisted living occupancy will stay within the 87% – 89% range for 2017, Mace predicted to SHN.
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Senior housing construction starts during the fourth quarter of 2016 preliminarily amounted to 3,554 units, which included 2,672 assisted living units and 882 independent living units. Starts totaled 17,719 units on a four-quarter basis, the weakest pace since the fourth quarter of 2014.
Additionally, current senior housing construction as a share of existing inventory totaled 5.7% in the fourth quarter of 2016, hitting its lowest level since the second quarter of 2015.
The average rate of seniors housing’s annual asking rent growth, meanwhile, totaled 3.7% in the fourth quarter of 2016. This was the same as in the previous quarter and 0.9 percentage points above its pace in the fourth quarter of 2015.
“This was the same growth rate that we saw in the third quarter and marked the fastest growth rate for asking rents in nearly ten years,” Chuck Harry, NIC’s chief of research and analytics, said in a press release. “From year-earlier levels, this same-store growth was fastest for independent living properties, whose asking rents increased by 4.0%, compared to the 3.1% gain seen in assisted living properties.”
Written by Mary Kate Nelson