Senior Housing Occupancy Rises But Oversupply Fears Persist

The National Investment Center for Seniors Housing & Care (NIC) revealed its third quarter market fundamentals results Wednesday, finding a slight bump in occupancy rates for the first time in 2015. But this likely does not signal a lasting reversal, as the boost might be due mainly to seasonality, while pressure from growing supply and larger economic forces remains.

Seniors housing occupancy rose 0.2% from the previous quarter to reach 89.9% overall, according to NIC MAP data. The rate increased 0.1% in independent living and 0.3% in assisted living from the second quarter, reaching 91.1% and 88.3%, respectively.


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“Occupancy rose for the first quarterly increase in 2015, following a sequence of declines in the first and second quarter,” NIC Senior Analyst Chris McGraw told SHN. “However, there is usually some seasonality in the third quarter. Once you account for that lift, most of that is explained away in seasonal trends.”

Compared to the same time period last year, occupancy for assisted living was down 0.8%, while independent living was up 0.2%. Occupancy was up 3% from its cyclical low during the first quarter of 2010.


Overall, the rate of absorption slowed as the pace of construction continued to pick up. Annual absorption dropped to 1.8%, a decline of 0.2% from the previous quarter.

“Despite occupancy going up, the annual rate of absorption is, on a year-to-year basis, continuing to slow,” McGraw told SHN. “While absorption accelerated to the fastest pace in a year, it wasn’t quite where you might expect to see it for seniors moving in during the third quarter.”

Beth Burnham Mace, chief economist for NIC, noted that there is typically a rise in occupancy during the summer months as families moved loved ones into senior housing, but other factors may have affected consumer confidence to make real estate moves.

“The improvement in occupancy followed two quarters of declines despite the volatility in the stock market and uncertainty abut the Federal Reserve increasing interest rates, which appear to have affected overall consumer confidence levels,” Mace said in a prepared statement.

Construction as a share of existing inventory accelerated to 4.9%, up 0.2% from the second quarter. The uptick represented a new cyclical high that is putting pressure on occupancy rates. With continued growth in supply, occupancy is largely expected to remain unchanged, despite growing demand.

“It seems like occupancy is hitting a lot of resistance around where it is now,” McGraw notes. “Based on the data now, it looks like it’s hitting its peak.”

Other pressures keeping occupancy rates from shifting upward is a higher rate of turnover in assisted living, in part due to frailer residents, says McGraw.

Written by Amy Baxter

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