The next couple of months may bode well for occupancy at continuing care retirement communities (CCRCs), but not so much at independent or assisted living communities.
That’s according to the latest Seniors Housing Research Report from real estate services firm Marcus & Millichap (NYSE: MMI).
In the first half of this year, independent living occupancy will drop 20 basis points from its year-end 2017 occupancy of 91.5% to 91.3%, and assisted living occupancy will drop 50 basis points from its year-end 2017 occupancy of 88.6% to 88.1%, the report predicts.
Occupancy at CCRCs, meanwhile, is expected to rise 30 basis points to 91.5%. Supply and demand in this segment are expected to remain balanced throughout 2018, the report says.
When it comes to assisted living, although the number of units under construction is lower than last year’s all-time high, it’s still well above historical norms, the report noted. This will result in occupancy declining and rent growth tempering in the first half of this year.
Meanwhile, there is currently “intense” demand for independent living units, but independent living occupancy will still likely decline this year due to an elevated number of completions, the report says.
Additionally, although independent living operators will likely have to compete for residents, rent is projected to increase an average of 1.7% to $3,158 per month in the first half of 2018.
All the while, recent changes to the U.S. tax code are expected to benefit the seniors housing market as a whole, given that the new tax code makes homeownership less advantageous. As a result, more seniors may decide to sell their single-family homes and move into senior living communities.
Among U.S. adults 75 and older, homeownership fell for four consecutive years before landing at 76.8% at the end of 2017, according to Marcus & Millichap.
Written by Mary Kate Nelson