Senior Housing Demand Outpaces New Supply
The first quarter saw net absorption of 2,934 units across 31 markets, slightly outstripping inventory growth by 294 units, according to the National Investment Center for Seniors Housing & Care.
Demand for senior housing in the U.S. is catching up with supply, as inventory growth showed signs of slackening in the first quarter of 2019, according to data just released by the nonprofit National Investment Center for Seniors Housing & Care (NIC).
During the quarter, 2,934 senior housing units were absorbed on a net basis across the 31 Primary Markets tracked by NIC, slightly exceeding the new inventory by 294 units. This is the second consecutive quarter in which net absorption outpaced inventory growth, although in the final quarter of 2018 the margin was even slimmer.
The last time demand for senior housing exceeded new supply was late 2015. It’s too early to draw conclusions, but NIC’s chief economist Beth Burnham Mace told Multi-Housing News that the favorable data could mark the beginning of a trend. “(…) inventory growth appears to be cooling, due to a slowdown in construction starts, raising the possibility that demand for seniors housing might better align with supply later this year,” Mace noted in prepared remarks.
Available senior housing units were leased at the rate of 3.0 percent on a net basis in the first quarter of the year, an increase of 30 basis points from the previous quarter and 70 basis points on a year-over-year basis. Absorption is driven by a growing economy and a wave of seniors who were born after a Great Depression-era dip in birthrates and are now in their early 80s.
Wide variation across markets
Nationwide, the occupancy rate remained virtually unchanged quarter-on-quarter at 88.1 percent—up just 10 basis points from the previous quarter and down 20 basis points year-over-year. The current level of occupancy is 210 basis points below its most recent high of 90.2 percent achieved in the fourth quarter of 2014.
The national-level data obscures wide regional variations. Occupancy rates ranged as high as 94.1 and 92.2 percent in San Jose and San Diego, Calif., respectively, and as low as 77.1 and 77.5 percent in Houston and San Antonio, Texas.
“Local markets can vary due to changes in local economic performance, barriers to entry such as zoning and regulations, shifting demographics, and other factors,” commented Chuck Harry, NIC’s head of research and analytics in a prepared statement. “The 17 percentage point spread in occupancy across these major U.S. markets is exceptionally wide when compared to other commercial property types,” he added.
The changes in occupancy also varied, with Las Vegas increasing from 86.0 to 87.9 percent year-over-year, while in Houston occupancy slumped from 78.9 to 77.1 percent over the same period.
NIC defines senior housing to include independent living, assisted living and memory care facilities.