Supply Slackens for Senior Housing

ANNAPOLIS, MD-Supply growth of senior housing is starting to slacken–which could give the niche sector some breathing room in terms of absorption, according to new figures from NIC MAP, a data and analysis service of the National Investment Center for the Seniors Housing & Care Industry. Up until now, absorption hasn’t been able to keep pace with supply growth, which has been averaging 2% a year for the past several years, Michael Hargrave, vice president–NIC MAP, tells GlobeSt.com.

NIC MAP’s figures show that fundamentals are shifting subtly in the senior housing space. Occupancy rates fell for seniors housing in the first quarter of 2010 to 88% from 88.3% in Q4 2009. Meanwhile, rent growth continued, but at a slower pace than seen in the previous two years.

By contrast, a long trend of negative absorption for skilled nursing disappeared in the first quarter of 2010, becoming marginally positive. Skilled nursing occupancy rates rose to 89% in the first quarter, compared to 88.8% in fourth quarter 2009–the first quarter of positive absorption in three years.

Q1 also saw positive rent growth in senior housing–but at a slowing pace.The average monthly rent (AMR) per unit for independent living was$2,701–up 1.5% on a year-over-year basis. For assisted living, the AMR was $3,528–up 1.4% YOY. For seniors housing properties in general, year-over-year rent growth in the first quarter was 1.5%, which is slower than the pace a year ago (2.6%) and two years ago (3.7%).

Rents for skilled nursing also grew in the first quarter, to $7,928, which is up 3.3% YOY. The data for the top 31 metro markets also showed that the construction inventory pipeline is continuing to shrink.

Independent living supply in the top 31 metro markets totaled 322,225 units in Q1, with 283,211 total occupied units. In the same quarter, assisted living supply totaled 174,010 units, with 153,330 total occupied units. The seniors housing inventory has grown 11,826 units during the previous four quarters, while absorption during that time has been 6,108 units.

All together the overall construction pipeline shrunk 57% from 2008 to 2010, according to Hargrave. “We’re continuing to see inventory growth, but we’re not seeing enough new projects to replace what was in the pipeline,” he says.