Seniors housing demand keeping pace with growth, NIC says

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Seniors housing occupancy increased to 90.1% in the fourth quarter of 2015 as strong demand surpassed inventory growth for second consecutive quarter, according to data released Jan. 6 by the National Investment Center for Seniors Housing and Care's MAP Data Service. Construction activity also reached a new cyclical high.

“Since its low point in the second quarter of 2015, the seniors housing occupancy rate has increased by 40 basis points but remains 20 basis points below its most recent cyclical peak in late 2014,” Beth Burnham Mace, chief economist for NIC, said in a statement. “This shows that demand has generally been able to keep pace with the significant growth we've seen in supply and speaks to the relatively solid fundamentals in the sector.”

Net absorption of seniors housing units outpaced the additions to inventory, according to NIC, representing an increase of 0.2 percentage points from the previous quarter. The rate was 0.2 percentage points short of the cyclical peak of 90.3%, which was reached a year earlier. As of the fourth quarter, occupancy was 3.3 percentage points above its cyclical low of 86.9% during the first quarter of 2010.

The occupancy rate for independent living properties averaged 91.4% during the fourth quarter of 2015, an increase of 0.2 percentage points over the previous quarter. Occupancy for independent living remained 0.1 percentage point above levels from a year ago.

In assisted living, the occupancy rate 88.4% during the fourth quarter, also an increase of 0.2 percentage points over the previous quarter. Occupancy for assisted living was down 0.5 percentage points from the fourth quarter of 2014.

The rate of seniors housing's annual asking rent growth during the fourth quarter of 2015 was 2.6%, which was 0.1 percentage point higher than the previous quarter's pace and was unchanged from its pace a year earlier, during the fourth quarter of 2014.

Seniors housing annual absorption was 2.0% as of the fourth quarter of 2015, compared with 1.9% during the third quarter of 2015 and 2.6% during the fourth quarter of 2014.

The seniors housing annual inventory growth rate was 2.2% in the fourth quarter of 2015, up 0.1 percentage point from the previous quarter and its strongest pace since 2010. Current construction as a share of existing inventory for seniors housing accelerated 0.2 percentage points to 5.5% as of the fourth quarter of 2015, which represents a new cyclical high, NIC said.

“While seniors housing's rate of inventory growth of 2.2% during 2015 remained well below its prior peak pace of 2.9% in 2008, the expected seniors housing completions during 2016 among those units currently under construction will likely result in 2016's rate of inventory growth registering closer to 2008's pace,” Chuck Harry, NIC's managing director and director of research and analytics, said in a statement.

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