It's a Slow but Steady Recovery for Seniors Housing

The seniors housing sector is fighting its way back to health, and the numbers tell the story.

Annapolis, Md.—The seniors housing sector is fighting its way back to health, and the numbers tell the story. As per NIC MAP, the National Investment Center for the Seniors Housing & Care Industry’s data analysis service, demand in the sector continues to inch slowly upward, with the average occupancy rate having consistently increased over the last seven quarters to 88.2 percent at the close of 2011.

For seniors housing, it’s all about baby steps. The fourth quarter’s occupancy rate marked an increase of 0.1 percent from the third quarter, and 0.7 percent from the fourth quarter of 2010. But progress is progress, and occupancies are comfortably above the sector’s cyclical low, reached in the first quarter of 2010, of 87.1 percent.

“The numbers are sort of panning out as they have in the past few quarters and over the past year or so,” Michael Hargrave, NIC MAP vice president, tells MHN. “It’s a gradual sort of recovery that we’re encountering right now and it’s like this in other property sectors as well. But I think the one real surprise could be the fact that independent living is gaining more steam right now than assisted living is.”

Much of the fourth quarter’s success can be attributed to independent living properties. While the average independent living vacancy rate of 88 percent lagged a bit behind assisted living properties’ average of 88.6 percent, independent living was the only seniors housing property type that experienced quarter-over-quarter improvement.

“Assisted living is a little bit more need-driven than independent living is, and therefore, during times when the economy is not doing as well, it’s thought that assisted living is a little bit more defensive than independent living,” Hargrave explains. “But in fact, in recent quarters, it’s been independent living that’s been leading the recovery in terms of the gradual rebound of occupancy rates.”

Regardless of which property type is in the lead position, the future for demand in the seniors housing sector as a whole appears bright. “We anticipate that seniors housing occupancy rate will rise by roughly 100 basis points during 2012, going up to 89.2 percent,” he notes. The ongoing progress will be aided in no small part by the construction, or lack thereof, actually. The annual inventory growth rate dropped from 1.5 percent in the fourth quarter of 2010 to 1.2 percent in the fourth quarter of 2011. “The pace of overall construction versus inventory continues to contract, more so on the independent living side than assisted living.”

While change can be good, more of the same is not so bad either, and that is precisely what is on tap for seniors housing this year. “Given what we understand to be the consensus forecast, we expect the trends that are in place right now—this slow, gradual recovery—to continue throughout 2012,” Hargrave says.