Senior housing occupancy is expected to get worse before it gets better, though rental rates are anticipated to remain steady through it all, according to market analysts at Green Street Advisors.
In terms of market revenue per available foot (M-RevPAF)—a metric combining changes in rents with changes in occupancies—senior housing is anticipated to fare better than most other commercial real estate sectors through 2022.
Specifically, for senior housing, annual growth in M-RevPAF is expected to be 2.9% between 2018 and 2022, according to Green Street Advisors. That’s less than the industrial sector, where M-RevPAF is predicted to grow 4.8% annually during that period, but higher than apartment and office buildings, where M-RevPAF is anticipated to grow just 2.1% and 1.1% per year, respectively.
Unlike occupancy, senior housing rate growth isn’t likely to change substantially in the next few years, Andrew Suh, senior equity research associate at Green Street, told Senior Housing News. Green Street is an independent research and advisory firm based in Newport Beach, California.
“We’ve seen that for the Big 3 REITs, they’ve been pretty consistent at 3% rate growth,” Suh said. Green Street believes that this level of growth is going to continue—which is good news for an industry that’s bound to see occupancy decline in 2018 and 2019.
“[Consistent 3% rate growth is] the only really saving grace for the senior housing operating portfolios because we see occupancy declining,” Suh explained. “We think 2018 and 2019 will be challenged in terms of occupancy. We forecast occupancy to decline this year and next year, and rebound in 2020 through 2022.”
Written by Mary Kate Nelson