Seniors housing construction hit a new high for the market cycle, according to third quarter 2015 data released by the National Investment Center for Seniors Housing and Care’s MAP Data Service. Also, seniors housing occupancy levels saw a seasonal boost in the third quarter, as demand exceeded inventory growth.
Current construction as a share of existing inventory for seniors housing accelerated 0.2 percentage points to 4.9% as of the third quarter.
The increase is a new cyclical high, but on a longer-term basis, “the growing level of units under construction registered again in the third quarter reflects that seniors housing is in the growth phase of its real estate cycle,” says Chuck Harry, NIC’s managing director and director of research and analytics. “In fact, during the four quarters ending with the third quarter 2015, the number of new seniors housing units added to inventory exceeded the number of units absorbed on a net basis, resulting in the occupancy rate having been pushed down by 30 basis points from the year-earlier levels,” he adds.
Overall, as the sector’s net absorption of units outpaced the additions to its inventory during the quarter, the average occupancy rate for seniors housing properties in the third quarter was 89.9%, an increase of 0.2 percentage points from the previous quarter. As of the third quarter, occupancy was 3.0 percentage points above its cyclical low of 86.9% during the first quarter of 2010.
The occupancy rate for independent living properties averaged 91.1% during the third quarter. When compared with the previous quarter, independent living’s occupancy increased by 0.1 percentage points, and occupancy for independent living was still 0.2 percentage points above year-ago levels.
The occupancy rate for assisted living properties averaged 88.3% during the third quarter, an increase of 0.3 percentage points when compared with the previous quarter. Occupancy for assisted living is down 0.8 percentage points from the third quarter of 2014, however.
“The [overall] improvement in occupancy followed two quarters of declines despite the volatility in the stock market and uncertainty about the Federal Reserve increasing interest rates, which appear to have affected overall consumer confidence levels,” says Beth Burnham Mace, chief economist for NIC. She noted, however, that “we often see a pickup in occupancy in the summer months as families move loved ones into seniors housing.”
Seniors housing annual absorption was 1.8% as of the third quarter, compared with 2.0% during the second quarter of 2015 and 2.9% during the third quarter of 2014. The rate of annual absorption has been decelerating during the past four quarters and is now at its slowest rate since 2011.
The seniors housing annual inventory growth rate was 2.1% in the third quarter of 2015, unchanged from the previous quarter.
The rate of seniors housing’s annual asking rent growth was 2.4% during the third quarter, 0.1 percentage point above the previous quarter’s pace and unchanged from its pace one year earlier during the third quarter of 2014.