Senior housing construction may outpace demand

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The current boom in senior housing building may outpace demand and lead to trouble for real estate companies, according to a report from the Wall Street Journal. Overbuilding could lead to higher vacancy rates and lower rent increases for real estate firms who own senior housing.  

The occupancy rate for all senior housing in 31 major markets fell this spring, for the second consecutive quarter, according to the National Investment Center for Seniors Housing & Care.

In some metropolitan areas, including Dallas, Atlanta and Chicago, new assisted living units under construction represent more than 10 percent of the city's existing industry, according to NIC. In the 31 markets where occupancy fell, new construction represented 6.4 percent of the existing inventory, compared with 3.4 percent in 2011.

“The construction really hasn't slowed, and it's continuing to be an issue,” Kevin Tyler, an analyst with Green Street Advisors, told the Wall Street Journal.

In addition to the pressure of finding residents for their new facilities, the Wall Street Journal noted that shares of companies that own a lot of senior housing have already taken a hit this year. Brookdale Senior Living Inc.'s stock is down 20 percent for 2015, while Health Care REIT Inc. and HCP Inc. are down 11 percent and 14 percent, respectively.

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