Senior housing occupancy worsened in the second quarter of the year, with independent living trends in particular raising red flags, according to the latest information from the National Investment Center for Seniors Housing & Care (NIC).
Occupancy for the senior housing sector—including assisted living and independent living—declined to 89.7% for the second quarter of 2016, according to the NIC data released Wednesday. The findings mirror the slight drop seen during the first three months of 2016, when occupancy for the overall senior housing market dropped to 90%, down from 90.1% overall at the end of 2015.
For assisted living, occupancy in the second quarter was down 0.2 percentage point, reaching 88%.
Independent living occupancy for the second quarter averaged 91%, down 0.3 percentage point from the prior quarter.
But it was independent living’s absorption rate versus inventory growth that NIC highlighted as a potential trouble spot.
“By property type, it is notable that independent living’s annual absorption rate slowed, while its annual rate of inventory growth is accelerating,” said Beth Burnham Mace, NIC’s chief economist, in a prepared statement. “The annual absorption and inventory growth rates for assisted living are decelerating, although the pace of activity is still stronger for assisted living. If this pattern continues, it suggests that there will be additional downward pressure on occupancies for independent living in the near future.”
And even as this foreboding trend took shape, independent living construction starts dominated in the second quarter, noted Chuck Harry, NIC’s chief of research and analytics.
“This construction cycle had been dominated by starts of assisted living units until this quarter,” Harry stated. “During the second quarter, starts of independent living units doubled from that of the prior quarter and surpassed assisted living unit starts, which declined by roughly one-third from their level during the prior quarter.”
Construction, which has reached all-time highs in the sector overall, dropped slightly, dipping to 5.6% as a percentage of inventory. During the first quarter of the year, construction was 5.7%.
For senior housing generally, annual absorption, inventory growth, and construction versus inventory all were down from the prior quarter.
Annual asking rent growth hit its fastest clip since mid-2008, NIC noted. It grew at a rate of 3.2% in the second quarter of this year, eclipsing the prior quarter’s pace by 0.1 percentage point and its year-over-year pace by 0.8 percentage point.
The rent stats support comments about increases made by senior living company executives during quarterly earnings calls in the spring. The nation’s largest senior living provider, Brookdale Senior Living (NYSE: BKD), was among the companies pushing aggressive rent increases earlier this year.
Written by Amy Baxter