Standing Out From a Crowd:Seniors Housing Occupancy and Absorption Rise in the Third Quarter

Sam Chandan PhD FRICS Real Estate Econometrics and the Wharton School

Michael HargraveNational Investment Center for the Seniors Housing and Care Industrywww.nicmap.org

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Headline Trends in Seniors Housing

The occupancy rate of seniors housing increased by 30 basis points between the second and third quarters - rising to 88.4 percent - in spite of material additions to the national inventory. In fact, absorption strengthened markedly in the third quarter, eclipsing the trend rate of the previous three and a half years to reach the highest level in NIC's record. The resulting improvement in the occupancy rate, the first in two and a half years, follows a sustained period of deterioration: over the last year, the seniors housing occupancy rate has fallen by 140 basis points; peak-to-current, the occupancy rate has fallen by 380 basis points.

As the seniors housing occupancy rate has edged up, year-over-year asking rent growth has slowed but has remained positive. Like the occupancy rate, asking rent growth peaked in the first quarter of 2007. Since then, it has slipped from 4.7 percent to 1.8 percent in the third quarter of 2009.

Dimensions of Variation

Only a small subset of properties report year-over-year declines in rents. The slowdown in rent growth is evident, however, in the plurality of properties that report increases below 1.0 percent. Illustrative of the nuanced relationship between macroeconomic and housing market trends and seniors housing performance, metro areas reporting the strongest rent growth include Baltimore, Boston, Philadelphia, Portland (Oregon), and St. Louis.

Retirement Communities The occupancy rate for continuing care retirement communities (CCRCs) with an entrance fee model