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NIC MAP: Occupancy down, rent growth up

April 10, 2015
by Lois A. Bowers, Senior Editor
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Overall senior housing occupancy declined in the first quarter of 2015 due to weak absorption and a moderate increase in inventory, according to the National Investment Center for Seniors Housing and Care’s MAP Data Service. Rent growth continued to accelerate for most independent living properties, according to the web-based source of research and analysis.

Occupancy. Overall, the average occupancy rate for senior housing properties in the first quarter was 90.2 percent, a decrease of 0.2 percentage points from the previous quarter. As of the first quarter, occupancy was 3.3 percentage points above its cyclical low of 86.9 percent during the first quarter of 2010.

Data for the first quarter showed stable occupancy levels for majority independent living properties, at 91.2 percent, the same as in the fourth quarter of 2014, which was the best showing since late 2007 and 1.0 percentage points above year-earlier levels. Rent growth accelerated to 2.7 percent, the fastest rate since late 2009.

“Majority independent living properties have benefited from relatively moderate levels of new units being delivered into the market,” Chuck Harry, NIC’s managing director and director of research, said in a statement. “Strong occupancy levels have started to put upward pressure on rent growth,” he added.

Occupancy rates for majority assisted living properties slipped to 88.7 percent in the first quarter of 2015, down 60 basis points from 89.3 percent in the fourth quarter of 2014 and 20 basis points from 88.9 percent in the first quarter of 2014. The decline reflected moderate levels of deliveries and weak absorption, a measure of demand and defined as the change in occupied units.

The nursing care occupancy rate increased 0.2 percentage points to 88.5 percent during the first quarter.

Absorption. “The absorption numbers were a surprise juxtaposed to generally favorable economic trends and were a contrast to recent trends where absorption had been very strong,” Beth Burnham Mace, NIC’s chief economist, said in a statement. “The first-quarter numbers are difficult to fully explain and may be an aberration,” she continued. “We look forward to seeing the second-quarter figures to see the extent to which first-quarter numbers were related to seasonal patterns or the effects of the flu season on residents. The sector’s first-quarter numbers are often relatively weak.”

Harry added: “Whereas the levels of new supply in select markets has generally been more of a concern for assisted living up until this point, the first quarter drop in occupancy for majority assisted living was due less to supply pressures than to the soft demand.”

The annual absorption rate in nursing care was ‒0.2 percent.

Asking rent growth. For the broader senior housing sector, rate of annual asking rent growth increased to 2.4 percent during the first quarter, an increase of 0.1 percentage points from the previous quarter and 0.6 percentage points above its year-earlier pace.

Senior housing annual absorption decelerated to 2.4 percent as of the first quarter of 2015, compared with 2.7 percent during the fourth quarter of 2014 and 2.3 percent during the first quarter of 2014.

Private-pay rents for the nursing care sector grew 2.5 percent year-over-year in the quarter just ended, which is 0.2 percentage points below the pace of the previous quarter.

Annual inventory growth. In the fourth quarter of 2014, the seniors housing annual inventory growth rate inched up to 1.8 percent from 1.7 percent during the previous quarter. Current construction as a share of existing inventory for seniors housing was 3.9 percent, which was unchanged from the previous quarter.

Nursing care annual inventory growth was ‒0.3 percent in the first quarter of 2015.

Source: National Investment Center for Seniors Housing and Care’s MAP Data Service

Related content:

NIC MAP data for the fourth quarter of 2014

NIC MAP data for the first quarter of 2014