Occupancy in the seniors housing industry is inching closer to the 90 percent threshold, moving up 20 basis points to 88.8 percent in the third quarter, according to a report released today by the NationalCenter for the Seniors Housing & Care Industry (NIC).
The reportwas collected through the non-profit’s NIC MAP data analysis service, which tracks more than 12,600 properties on a quarterly basis in the 100 largest metropolitan markets. This is the 10th straight quarter that occupancy has increased, rising from the cyclical low of 87 percent in the first quarter of 2010, according to the report.
Chuck Harry, NIC’s director of research and analysis, says the industry is still far from the peak of the 91.9 percent occupancy seen in the second quarter of 2006. However, he says he sees occupancy hitting the 90 percent mark by early 2014.
“We’re probably more than a year away from that level,” Harry says. “We’ll likely see movement up by 20 basis points per quarter for the next few quarters.”
Harry cited numerous reasons for the slow growth of the industry, with the sluggish housing and investment market topping the list. Both home prices and interest rates are down, and they typically serve as anchors that seniors could count on to help pay community fees.
The biggest growth market for the industry today is memory care, according to Harry. The past two quarters have seen an average of 6 percent growth inof new memory care properties in the top 31 national markets, almost triple the amount of activity for new assisted living development.
“We’re also seeing the average entry age move upward for all seniors housing,” Harry says. “Many of our residents are electing to make the move from a home to a community later than they had before 2006, with the majority of them being women. They’re coming in older, and with a level of need hitting higher, at least needing assisted living.”
Both the independent living and assisted living sectors showed slight improvement from the second quarter, according to the MAP data. Harry says rent growth and absorption also had boosts of 2.2 percent from three months prior.
“One of the main takeaways from this data is how construction levels have remained tempered, with absorption outpacing inventory growth,” he says. “There is a couple of constraints to new. One is the apartment market is hot right now, and developers and investors are tying up any possible sites for multifamily.”
Another factor, he adds, is the highly fragmented nature of the industry with a large number of operators. While REITs have had a strong showing in property purchases in the past two years, totaling about $27 billion in 2011, trusts still only own 13 percent of the seniors housing properties nationwide.
“By no stretch of the imagination do they have a majority of the properties,” Harry says.