Occupancy rates are holding steady for seniors housing in the second quarter of 2011, while the pace of rent growth is rising, says NIC MAP, a data analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC).
Rent growth increased fairly significantly on a quarterly basis, going from 0.9% to 1.4% between 1Q 2011 and 2Q 2011, with a slighter annual swell of 0.2%.
“This annual pace of rent growth is the highest we’ve seen in the past five quarters, and is on par with core inflation for this same time period,” says Charles Harry, director of research & analysis, NIC.
The rent growth has not deterred seniors housing renters, however, as occupancy rates either went up or remained steady.
From 2Q 2010 to 2Q 2011, there was a 0.5% increase in the seniors housing occupancy rate, whereas there was no fluctuation whatsoever between this quarter and last, with the average occupancy rate resting at 88%. This rate is 0.7% above its cyclical low of 87.3% in 1Q 2010, the data analysis shows.
Occupancy rates for both independent and assisted living properties have also shown stability from last quarter’s rates. Occupancy increased slightly from 88.4% to 88.5% for assisted living, while independent living occupancy rates remained the same.
However, while rates haven’t exhibited much change on a quarterly basis, independent living occupancy has increased 0.6% from its cyclical low of 87.1% in 1Q 2010. Assisted living, on the other hand, peaked in 3Q 2008 with an 88.8% occupancy rate, and even though 2Q 2011 rates don’t quite match that, they’re at the highest levels since that time.
“While occupancy rates are currently trending sideways, they have moved from beyond their recent cyclical lows,” says Harry.
Even though occupancy rates have been holding steady, annual inventory growth isn’t making such a strong showing. In the second quarter, the inventory growth rested at 1.1%, down 0.2% from the previous quarter. While this isn’t a huge decline, it’s substantially lower than 2Q 2010’s 2.1% inventory growth, and NIC says this is the lowest level seen in the current market cycle. Despite this, however, construction vs. inventory seniors housing maintained its 1Q 2011 level at 1.9%.
The second quarter’s annual absorption rate, at 1.6%, is down somewhat from last year’s 1.9%, and has decreased from the first quarter’s 2.1%. However, Harry says this lower rate reflects the continuing softness in both the economy and the housing market.
The occupancy rate for nursing care decreased slightly to 88.4%, down from the previous quarter’s 88.5%. Annual inventory growth for nursing care fell 0.1% in the second quarter, while the annual pace for private pay rents went up 3.3%, matching the first quarter’s pace.
Written by Alyssa Gerace