Occupancy Dips in First Quarter Due to Weak Absorption, Supply Increase, Says NIC

by Jeff Shaw

ANNAPOLIS, Md. — The occupancy rate in the U.S. seniors housing sector — which includes both independent and assisted living — registered 90.2 percent during the first quarter of 2015, down 20 basis points from the prior quarter, according to the National Investment Center for Seniors Housing & Care (NIC). Still, the occupancy rate is 3.3 percentage points above its cyclical low of 86.9 percent reached during the first quarter of 2010. All statistics are based on data from 31 top markets in the U.S.

At majority independent living properties, the occupancy rate was unchanged at 91.2 percent, maintaining the highest rate since late 2007. Annual rent growth for majority independent living 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,” says Chuck Harry, managing director and director of research for Annapolis-based NIC. “Strong occupancy levels have started to put upward pressure on rent growth.”

Meanwhile, the occupancy rate at majority assisted living properties came in at 88.7 percent during the first quarter of 2015, down 60 basis points from 89.3 percent at the close of 2014 and 20 basis points lower than the first quarter of 2014. The decline reflected moderate levels of deliveries combined with weak absorption, according to NIC.

“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,” says Beth Burnham Mace, NIC’s chief economist. “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.”

Seniors 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.

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 prior quarter. Current construction as a share of existing inventory for seniors housing was 3.9 percent, unchanged from the prior year.

The nursing care occupancy rate increased 0.2 percentage points to 88.5 percent during the first quarter of 2015.

Nursing care annual inventory growth declined by 0.3 percent in the first quarter of 2015, while annual absorption fell 0.2 percent. Private pay rents for the sector grew 2.5 percent year-over-year during the first quarter, which is 0.2 percentage points below the pace of the prior quarter.

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