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Research - APRIL 12, 2019

Senior housing occupancy rate remains stable at 88%

by Jody Barhanovich

The occupancy rate for senior housing across the United States remained virtually unchanged at 88.1 percent in the first quarter of 2019, according to data from the National Investment Center for Seniors Housing & Care (NIC), a nonprofit organization that provides independent research and analytics to promote access and choice in senior housing.

Occupancy increased 0.1 percentage point from the previous quarter and decreased 0.2 percentage point from one year ago. Occupancy in first quarter 2019 was 2.1 percentage points below its most recent high of 90.2 percent in fourth quarter 2014.

“Occupancy in seniors housing properties remained stable nationally but varied greatly from market to market,” said Chuck Harry, NIC’s head of research and analytics. “Local markets can vary due to changes in local economic performance, barriers to entry such as zoning and regulations, shifting demographics, and other factors.”

Of the 31 metropolitan markets that comprise NIC’s primary markets, the highest first quarter U.S. occupancy rates occurred in San Jose (94.1 percent) and San Diego (92.2 percent). The lowest first quarter occupancy rates were in Houston (77.1 percent) and San Antonio (77.4 percent).

NIC data show the largest occupancy increase from a year ago occurred in Las Vegas (from 86.0 percent in first quarter 2018 to 87.9 percent during the same period in 2019). The largest decrease occurred in Houston (from 78.9 percent in first quarter 2018 to 77.1 percent during the same period of 2019).

Harry added, “The 17 percentage point spread in occupancy across these major U.S. markets is exceptionally wide when compared to other commercial property types.”

NIC data suggest a possible slowing in new senior housing construction. Senior housing construction starts during first quarter 2019 in NIC’s 31 primary markets totaled 4,003 units, which include 2,236 independent living units and 1,767 assisted living units. Starts totaled 19,367 units across the previous four quarters. Data on quarterly construction starts are considered preliminary, as they often are revised in subsequent quarters as additional information becomes available.

“We continue to see strong demand for seniors housing nationally, as demand slightly exceeded inventory growth in the first quarter, albeit by a relatively small amount,” said Beth Burnham Mace, NIC’s chief economist. “At the same time, inventory growth appears to be cooling, due to a slowdown in construction starts, raising the possibility that demand for seniors housing might better align with supply later this year.”

Other NIC data released as part of its quarterly report show:

  • Occupancy rates for independent living and assisted living properties averaged 90.4 percent and 85.5 percent, respectively, during the first quarter of 2019. Independent living occupancy was up 0.1 percentage points from the prior quarter and unchanged from a year ago. Assisted living occupancy remains relatively low and was up 0.3 percentage points from the all-time low of 85.2 percent reached in the second quarter of 2018. It was also up 0.1 percentage points from the fourth quarter but declined 0.2 percentage points from a year ago.
  • The nursing care occupancy rate increased to 86.7 percent in first quarter 2019 from 86.3 percent in fourth quarter 2018. The nursing care annual inventory growth rate was –0.3 percent in first quarter 2019, while annual absorption was –0.2 percent. Private-pay rents for the sector grew 2.6 percent year-over-year this quarter, up 0.1 percentage points from year-earlier levels.
  • The pace at which available senior housing units were leased on a net basis — the absorption rate — was 3.0 percent as of first quarter 2019, up 0.3 percentage points from fourth quarter 2018, and up 0.7 percentage points from one year earlier. The annual inventory growth rate in first quarter 2019 stood slightly higher than the absorption rate at 3.1 percent, declining 0.4 percentage points from the fourth quarter.
  • Preliminary data on construction as a share of existing inventory for senior housing was 6.7 percent in first quarter 2019, 0.8 percentage points below its recent high of 7.5 percent in the fourth quarter of 2017.
  • During first quarter 2019, the average rate of senior housing’s annual asking rent growth was 3.0 percent, unchanged from the prior quarter and down from a recent high of 3.8 percent in the fourth quarter of 2016.
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