Senior Housing Q1 Occupancy Nudges Upward as Construction Slows

Overall occupancy for all senior housing property types ticked slightly upward during the first quarter of 2014 as new construction slowed, according to recent data from the National Investment Center for the Seniors Housing & Care Industry (NIC).

The average occupancy rate for senior housing properties in the first quarter was 89.8%, an increase of 0.1 percentage points from the prior quarter and a 0.8 percentage point increase from a year earlier.

Breaking down property types, independent living occupancy fared slightly better than assisted living, growing 0.2 percentage points during the quarter, while assisted living occupancy decreased by 0.1 percentage points.

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The occupancy rate for independent living is now 3.4 percentage points above its cyclical low, NIC data notes, while for assisted living it is 2.4 percentage points above its respective cyclical low.

For nursing care, the average occupancy rate during the quarter was 88.4%, an increase of 0.4 percentage points from the prior quarter. 

Assisted living trumped independent living in terms of annual asking rent growth, despite remaining unchanged for the industry as a whole at 1.6%. 

“At 2.1%, annual asking rent growth for assisted living was stronger than for independent living at 1.4%,” said NIC Chief Economist Beth Burnham Mace in a statement, adding that “rent growth for both sectors exceeded the estimated increased costs for wages and food, two significant contributors to expense growth for the seniors housing sector.”

The annual inventory growth rate for the quarter was 1.4%, which NIC notes is near where this metric has oscillated since the fourth quarter of 2011. 

Current construction as a share of existing inventory for senior housing during the first quarter was 3.1%, a 0.1 percentage point decline from the previous quarter.

The quarterly dip signals a moderating pace of senior housing construction overall, which NIC’s Managing Director and Director of Research and Analytics Chuck Harry suggests is primarily the result of moderating construction starts in assisted living properties. 

“In fact, 2014’s first quarter recorded the lowest number of units starting construction within assisted living properties of any quarter during the past four-and-a-half years,” Harry stated. “Weather may have been a contributing factor, however.”

Senior housing annual absorption was 2.2% as of the first quarter of 2014, compared to 2.2% during the previous quarter and 2.1% during the first quarter of 2013.

Written by Jason Oliva

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