ANNAPOLIS, MD—National Investment Center for Seniors Housing & Carereports that fundamentals in the seniors housing sector have showed some improvement in this past quarter—but concerns about absorption have not entirely been vanquished.
Last quarter occupancy in the seniors housing sector pointed to a surprising level of weak absorption, NIC said at the time.
Namely, in Q1 NIC reported that the average occupancy rate for seniors housing properties dropped by 0.2 percentage points to 90.2%, from the prior quarter and that occupancy rates for majority assisted living properties slipped to 88.7%, down 60 basis points from 89.3% in the fourth quarter and 20 basis points from 88.9% in the first quarter of 2014.
"The absorption numbers were a surprise juxtaposed to generally favorable economic trends and were a contrast to recent trends where absorption had been very strong," Beth Burnham Mace, NIC's chief economist, said at that time.
Now, in Q2, it appears that demand as recovered from the first quarter's low levels, at least as measured by absorption, Mace says. "[B]ut the slip in occupancy shows that the pace of demand did not match new supply."
Indeed, more than 3,600 units came on line during the quarter—the highest number during any quarter of the past six years, according to Chuck Harry, NIC's managing director and director of research and analytics. More inventory growth is expected for the year, he continues. "Absorption's current pace will have to pick up in order for the market to experience any significant upward pressure on the seniors housing occupancy rate," says Harry.
The Stats
Overall, the average occupancy rate for seniors housing properties in the second quarter of 2015 was 89.9%, a decrease of 0.2 percentage points from the prior quarter. As of the second quarter of 2015, occupancy was 3.1 percentage points above its cyclical low of 86.8% during the first quarter of 2010.
The occupancy rate for independent living properties and assisted living properties averaged 91% and 88.4%, respectively, in Q2.
When compared to the prior quarter, each property type's occupancy decreased by 0.2 percentage points. Occupancy for independent living was still 0.5 percentage points above year ago levels, compared to assisted living which is down 0.3 percentage points from the second quarter of 2014.
Seniors housing annual absorption was 2.1% as of the second quarter of 2015, compared to 2.3% during the first quarter of 2015 and 2.7% during the second quarter of 2014.
The nursing care occupancy rate decreased 0.6 percentage points to 87.9% during the second quarter of 2015.
Nursing care annual inventory growth was -0.4% in the second quarter of 2015, while annual absorption was -0.7%. Private pay rents for the sector grew 2.5% year-over-year this quarter, which is unchanged from the pace of the prior quarter.
A call to NIC for comment was not returned by deadline.
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