It has been documented by NIC MAP® that seniors housing, an aggregate of majority independent living and majority assisted living, achieved a recent cyclical average stabilized occupancy high in 1Q07 at 92.8% for the MAP31 metro markets. Since reaching that cyclical high, average stabilized occupancy for seniors housing has declined 390 basis points (bps).
There has been an increase of 24,068 units/beds, or 5.4%, in the stabilized inventory since 1Q07, while the number of occupied units/beds in stabilized properties has only increased by 3,797, or 0.9%. This disjoint of supply and demand has likely been exaggerated by the economic conditions of the past year, with a large impact likely coming from the housing and employment market.
The conditions of the past year have resulted in much less emphasis on property development and a far greater emphasis on asset management and the ability to retain occupancy. It is a plausible hypothesis to believe that properties with strong in-house management and proven track records would be able to outperform their less experienced and more loosely managed counterparts in this type of economic environment. By examining the movement of the stabilized occupancy quartiles since 1Q07 we can infer if the above hypothesis has any merit.
It quickly becomes evident that properties that had strong occupancies prior to entering this period of decline, the upper quartile, have been more robust than their lower occupied counterparts, the lower quartile. The upper quartile (75th percentile) has declined 272 bps since 1Q07, while the lower quartile (25th percentile) has declined 550 bps! The median stabilized occupancy declined 412 bps during the same period, while the average declined 390 bps.
The upper quartile is outperforming both measures of centrality (average and median), while the lower quartile is underperforming. This result indicates there is a fundamental difference between properties in the upper and lower quartiles regarding their ability to retain occupancy. Source: Sept 2009 NIC Insider Newsletter.