Independent Living Bucks Q1 Senior Housing Occupancy Decline

Overall seniors housing occupancy declined in the first quarter of this year, but standing out from the stat is independent living, which boasted stable occupancy relative to the prior quarter, according to first quarter data released Thursday by the National Investment Center for Seniors Housing & Care (NIC).

The average occupancy rate for seniors housing properties in the first quarter of 2015 was 90.2%, a decrease of 0.2 percentage points from the prior quarter, according to NIC data. 

Independent living remained stable at 91.2% in the first quarter, the same as in the fourth quarter of 2014, which was the best showing since late 2007 and 1.0 percentage points above year-earlier levels, data show. In addition, rent growth accelerated to 2.7% — the fastest rate since late 2009. 

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“Majority independent living properties have benefited from relatively moderate levels of new units being delivered into the market,” says Chuck Harry, NIC’s managing director and director of research, in a statement. “Strong occupancy levels have started to put upward pressure on rent growth.” 

Assisted living occupancy did not fare as well, with occupancy rates slipping back to  88.7% in the first quarter of 2015, down 60 basis points from 89.3% in the fourth quarter and 20 basis points from 88.9% in the first quarter of 2014.

The decline reflected moderate levels of deliveries and weak absorption, a measure of demand and defined as the change in occupied units, NIC says.

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“The absorption numbers were a surprise juxtaposed to generally favorable economic trends and were a contrast to recent trends where absorption had been very strong,” says Beth Burnham Mace, NIC’s chief economist, adding that the first quarter numbers are difficult to fully explain “and may be an aberration.”

“We look forward to seeing the second quarter figures to see the extent to which first quarter numbers were related to seasonal patterns or the effects of the flu season on residents,” she says, noting that it is common for the sector’s first quarter numbers to be relatively weak.

The first quarter drop in occupancy for majority assisted living was due less to supply pressures than to the soft demand, Harry says.

On the bright side, the rate of seniors housing’s annual asking rent growth increased to 2.4% during the first quarter of 2015, an increase of 0.1 percentage points from the prior quarter and 0.6 percentage points above its year-earlier pace, data show. Seniors housing annual absorption, however, decelerated to 2.4% as of the first quarter of 2015, compared to  2.7% during the fourth quarter of 2014 and 2.3% during the first quarter of 2014.

In the fourth quarter of 2014, the seniors housing annual inventory growth rate inched up to 1.8% from 1.7% during the prior quarter, data show. Current construction as a share of existing inventory for seniors housing was 3.9%, which was unchanged from the prior quarter.

Nursing care occupancy also bucked the overall senior housing occupancy decline seen in Q1. The nursing care occupancy rate increased 0.2 percentage points to 88.5% during the first quarter of 2015.

Nursing care annual inventory growth was -0.3% in the first quarter of 2015, while annual absorption was -0.2%, data show. Private pay rents for the sector grew 2.5% year-over-year this quarter, which is 0.2 percentage points below the pace of the prior quarter.

Written by Cassandra Dowell

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