The occupancy rate for seniors housing properties in the second quarter of 2017 averaged 88.8%, as net additions to inventory outpaced absorption of units. This represented a decrease of 0.5 percentage point from the prior quarter and was down 0.9 percentage point from year-earlier levels. As of the second quarter of 2017, occupancy was 1.9 percentage points above its cyclical low of 86.9% during the first quarter of 2010 and 1.4 percentage point below its most recent high of 90.2% in the fourth quarter of 2014.
The occupancy rates for independent living properties and assisted living properties averaged 90.6% and 86.5%, respectively, during the second quarter of 2017. The occupancy rate for independent living was down 0.3 percentage point from the prior quarter and down 0.4 percentage point from year-earlier levels. The occupancy rate for assisted living was down 0.7 percentage point from the first quarter and down 1.4 percentage point from year-earlier levels. Occupancy for assisted living was equal to its low point reached in the data series in second quarter 2009.
Seniors housing annual absorption was 3.0% as of the first quarter of 2017, up 0.2 percentage point from the first quarter of 2017, up 0.6 percentage point from one year earlier, and its fastest pace since NIC began reporting the data in 2006. The seniors housing annual inventory growth rate in the second quarter of 2017 was 3.9%, up 0.5 percentage point from the prior quarter and also its fastest pace since NIC began reporting the data in 2006.
“Annual growth in inventory was high for both assisted living and independent living properties”, said Beth Burnham Mace, chief economist for NIC. “It reflects the strong level of starts that we saw in 2015. It often takes six to eight quarters for a project to move from ground breaking to completion, so activity that was started in 2015 is showing up now in inventory growth. Starts have been trending lower since 2015, so we should see some slowdown in completions in the coming quarters.”
Current construction as a share of existing inventory for seniors housing preliminary slowed 0.3 percentage point from the prior quarter to 5.8% and was 0.8 percentage point below its recent high of 6.6% in the third quarter of 2016.
Seniors housing construction starts within the 31 Primary Markets during the second quarter of 2017 preliminarily totaled 4,172 units, which included 1,897 independent living units and 2,275 assisted living units. On a preliminary four-quarter basis, starts totaled 18,324 units. Construction starts data is often revised retrospectively in subsequent quarters as additional information becomes available.
“The softening occupancies for both assisted living and independent living is the result of their inventory growth, or unit completions, surpassing their relatively healthy annual rates of absorption of units, including the record pace of absorption for assisted living,” said Chuck Harry, NIC’s chief of Research & Analytics. “The record rate of annual absorption for assisted living properties of 4.3% still fell well short of its record annual inventory growth of 5.9%. For independent living properties, those annual rates, respectively, were 2.0% and 2.5%.”
During the second quarter of 2017, the average rate of seniors housing’s annual asking rent growth was 3.4%, unchanged from the prior quarter, and up from 3.2% in the second quarter of 2016. For comparison purposes, expense growth as measured by the annual change in assisted living average hourly earnings was 4.2% in the first quarter, according to the Bureau of Labor Statistics.
The nursing care occupancy rate decreased to 86.5% in the second quarter of 2017 from 87.2% in the first quarter of 2017. The nursing care annual inventory growth rate was 0.1% in the second quarter of 2017, while annual absorption was down by -0.6%. Private pay rents for the sector grew 2.6% year over year this quarter, down 0.2 percentage point from year-earlier levels.
Read the full release at www.nic.org