4Q09 NIC Data Shows Seniors Housing Occupancy Falls While RentsContinue To Rise
Occupancy rates fell for seniors housing in the fourth quarter of 2009, while rents continued to grow, according to NIC MAP, a data and analysis service of the National Investment Center for the Seniors Housing & Care Industry (NIC). In addition, the data showed that the construction pipeline continued to empty as new product came on board, and the level of starts dropped off precipitously.
After seeing the average occupancy rate rise slightly for seniors housing (both independent living and assisted living properties) during the 3Q09, it fell to 88.2% during the 4Q09. In comparison, the average occupancy rate during the fourth quarter of 2008 stood at 89.8% percent for independent living properties or continuing care retirement communities with a majority of independent living units; it was 88.9% for assisted living properties.
"At the same time, our fourth quarter 2009 data was the third straight quarter where seniors housing registered positive absorption, indicating positive demand growth," said Robert G. Kramer, president of NIC. "More people have been living in seniors housing in the past year, so the industry is growing in terms of consumer demand." So why has occupancy fallen? "Supply grew faster than demand during the quarter, which led to an overall lower occupancy rate," explained Kramer. "But the construction pipeline is emptying out as more units come online. In addition, the rate of starts has slowed significantly. And with the very tight credit markets, that situation is unlikely to change anytime soon. This could be very positive news for occupancy growth in seniors housing in 2011 and 2012."
The fourth quarter of 2009 also confirmed that although rents remained positive, overall rent growth continued to slow for seniors housing. "This continues a trend that we've seen since 2007," said Michael Hargrave, vice president—NIC MAP. "Year-over-year rent growth is now 1.6%. This reflects an increasing percentage of seniors  housing operators that are choosing to keep rents steady, rather than passing through annual rent increases to their residents."
The average monthly rent (AMR) per unit for independent living was up slightly during the 4Q09 to $2,659, which compared to $2,618 year over year. For assisted living, the AMR was $3,536 in the 4Q09, up from $3,478 during the 4Q08. For independent living, the trailing-12 month (TTM) construction activity was just 0.5% of existing inventory in 4Q09. New construction starts for assisted living were only slightly better at 0.6%.
Source: Long Term Living, Long Term Care Magazine e-newsletter, March 5, 2010