Conversation surrounding the risk of oversupply in the senior housing industry has been ongoing recently, with one frequent observation being that supply concerns differ greatly by locality. But supply also varies among different types of senior housing properties, and data shared Friday by the National Investment Center for Seniors Housing and Care (NIC) brings this consideration to the forefront of the discussion.
Construction of memory care and assisted living campuses has bounced back following the recession, while the addition of more independent living and continuing care retirement community properties has been slower, according to the data.
Memory care facilities have seen the highest development rate, with units under construction exceeding existing inventory by 9% during the second quarter of 2015.
As the smallest sector within the senior housing market, though, the growth rate hardly represents a significant uptick, particularly when considered on a unit basis, Chris McGraw, a senior research analyst for NIC, tells SHN.
Still, there is definitely a need for memory care in the sector, McGraw says, but it’s the most expensive of all private-pay services. The high cost, coupled with building more of these campuses, has resulted in fairly high vacancies, mirroring data released in July that showed declining occupancy across senior housing as a whole.
“Occupancy in memory care has been pressured as a result of that growth,” McGraw tells SHN.
The supply coming into the memory care market, then, has slowed the asking rent growth rate, which could partially be attributed to memory care providers keeping rents flat or cutting them to draw more occupants, he says. As such, prior growth levels of asking rents cannot be maintained.
Meanwhile, CCRCs and independent living facilities are components of the sector facing less of an oversupply risk, McGraw says, primarily because their construction “hasn’t materialized at the pace of assisted living and memory care.” Asking rents among independent living properties, in particular, have returned to where they were pre-recession, he says.
Written by Kourtney Liepelt