Senior Housing Construction Activity Gets 1Q Nudge, Occupancy Flat

Although senior housing occupancy did not register any cumulative change during the first quarter of 2013, new construction activity did see a slight increase and annual asking rent growth got a 90 basis point boost, according to NIC MAP, the National Investment Center (NIC) for the Seniors Housing & Care Industry’s data and analysis service.

Average senior housing occupancy remained at 89.1% in the first quarter—the same rate as the last quarter of 2012, but up 80 basis points from a year ago.

The first quarter of 2013 marked the first time since the second quarter of 2010 that average senior housing occupancy failed to rise, notes NIC. But even though the occupancy recovery stalled, it’s still 2.2 percentage points above its cyclical low of 86.9% of 2010.

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Broken down into assisted living and independent living, occupancy rates did see movement in the first quarter.

Independent living occupancy averaged 89.3%, up 20 basis points, while assisted living occupancy actually dropped 20 basis points to 88.8%.

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On the independent living side, occupancy is now 2.5 percentage points above its cyclical low, continuing its trend of a faster recovery than assisted living, which is 1.9 percentage points above its cyclical low.

“We had been seeing independent and assisted living occupancies moving in tandem during the past year. Going forward, we may begin to see a divergence, as inventory growth headwinds have been developing for assisted living, while construction in independent living remains comparatively tempered,” said Mike Hargrave, NIC’s chief market & data strategist, in a statement.

Senior housing’s annual asking rent growth accelerated to 2.3% in the first quarter, 90 basis points above its pace a year ago.

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“While seniors housing rent growth overall accelerated, its acceleration was driven by assisted living properties. Annual rent growth in assisted living properties accelerated 40 basis points, while the pace of annual rent growth in independent living properties remained essentially flat,” said Chuck Harry, NIC’s managing director and director of research and analytics.

Annual absorption was 2.1%, down slightly from the previous quarter’s 2.3% and 10 basis points beneath senior housing absorption levels in the first quarter of 2012.

“While the pace of annual absorption continues to outpace that of annual inventory growth, the delta compressed this quarter as absorption slowed. Based on the construction pipeline, inventory growth will likely begin to accelerate modestly in the near-term, which may cause the delta to compress yet further,” says Harry.

The senior housing annual inventory growth rate, at 1.2%, hasn’t changed much since the fourth quarter of 2011, according to NIC. However, current construction as a share of existing inventory for senior housing was 2.5%, up 20 basis points from the previous quarter.

On the skilled nursing side, the first quarter’s occupancy rate decreased 0.1 percentage points to 88.0% from the previous quarter. Annual inventory growth was also negative, down 20 basis points and continuing the established trend of slightly declining inventory growth, NIC says.

Private pay rents for nursing care grew 2.8% year-over-year in 2013’s first quarter, unchanged from the fourth quarter of last year’s pace.

Written by Alyssa Gerace

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