Increased occupancy rates and accelerating asking rent growth in the third quarter are some of the key metrics illustrating the rising demand for senior housing, show the latest data tracking the industry.
Seniors housing and care registered $11 billion in closed transactions volume through August, up 28% from this time last year, according to The National Investment Center for Seniors Housing & Care (NIC) Map Data Service. That volume is also reflective of the Brookdale Senior Living acquisition of Emeritus Corporation.
Overall, the average occupancy rate for seniors housing properties in the third quarter of 2014 was 90.3%, an increase of .4 percentage points from the prior quarter and a 1.0 percentage point increase from a year earlier, according to NIC data. As of the third quarter of 2014, occupancy was 3.4 percentage points above its cyclical low of 86.9% during the first quarter of 2010.
The occupancy rate for independent living properties and assisted living properties averaged 90.9% and 89.4%, respectively, during the third quarter of 2014.
When compared to the prior quarter, independent living occupancy increased by .4 percentage points, while assisted living occupancy increased by .5 percentage points. The occupancy rate for independent living is now 4.2 percentage points above its cyclical low, while the occupancy of assisted living is 2.9 percentage points above its respective cyclical low.
Asking Rent growth also increased in the third quarter compared to the quarter prior, data show. Pricing for seniors housing and care is about $160,000 per unit, and nursing care pricing continues to hover around $70,000 per unit.
During the third quarter of 2014, the rate of seniors housing’s annual asking rent growth accelerated to 2.3% from 2% in the prior quarter, and was .7 percentage points above its pace one year earlier during the third quarter of 2013.
Job growth and other economic factors contribute to increased senior housing demand, NIC analysts say, noting that even during the Great Recession the industry overall proved to be resilient compared to other property types.
“This is good news for the sector and follows the positive news we have been hearing about the national economy and the improving labor markets,” said Beth Mace, NIC’s chief economist, in a written statement, adding that ”stronger job growth, growing consumer confidence and the broad recovery in the stock market are contributing to the gains seen in occupancy and rent growth in seniors housing in the third quarter.”
Seniors housing annual absorption also saw an uptick in the third quarter — increasing from 2% during the third quarter of 2013 and 2.6% during the second quarter of this year to 2.9% in the third quarter.
The seniors housing annual inventory growth rate also increased in the third quarter by .2 percentage points at 1.7% compared to the prior quarter.
Current construction as a share of existing inventory for seniors housing, however, fell .1 percentage points at 3.4% compared to the previous quarter.
While seniors housing’s moderate rate of inventory growth continued during the third quarter, with approximately 2,600 units coming online in the primary markets, the rise in demand was almost twice that rate, said Chuck Harry, NIC’s managing director and director of research and analytics.
“The primary markets realized record absorption during the quarter, as the number of occupied seniors housing units increased by nearly 5,000—the highest rate of absorption in one quarter since the NIC MAP time series began as of year-end 2005,” Harry said.
The nursing care occupancy rate was unchanged at 88.3% in the third quarter of 2014. And nursing care annual inventory growth was essentially flat in the third quarter of 2014, while annual absorption was .8%. Private pay rents for the sector grew 2.8% year-over-year this quarter, which is .1 percentage points above the pace of the prior quarter.
Written by Cassandra Dowell