Annapolis, Md.–Sometimes no news is good news. According to the National Investment Center for the Seniors Housing & Care Industry’s third quarter NIC MAP, the occupancy rate, as well as rent growth and new construction activity, did not diverge much from second quarter figures, but that may very well mean that the sector has hit bottom.
As was exactly the case in the second quarter of 2010, the occupancy rate in the third quarter was 87.7 percent for the seniors housing sector. The performance in the independent living and assisted living sub-sectors helped maintain the balance. Occupancy rates at independent living properties dropped 30 basis points to 87.1 percent, but the 40 basis points jump that pushed up the assisted living rate to 88.7 percent prevented a downturn in seniors housing as a whole. “The message could suggest that we are past or at the bottom,” Chuck Harry, research director with NIC, tells MHN. “Many areas of seniors housing at the national level are showing good numbers. Assisted living is showing some strength, but that could be short-lived because of new developments coming online in the next couple of quarters.”
Annual rent growth in seniors housing dropped ever so slightly from 0.8 percent in the third quarter of 2009 to 0.7 percent in the third quarter of this year, and annual absorption was 1.2 percent, marking the third quarter in a row where the quarter-over-quarter figure remained over 1 percent
As for inventory in the national seniors housing market, it held relatively steady quarter-over-quarter, but rose 1.7 percent from the third quarter of 2009. Although the change denotes a year-over-year increase, it also denotes a small, but significant continuation of the decline in the 2 percent inventory growth rate that occurred for three years until the second quarter of this year. The drop in construction activity from 2.1 percent in the second quarter to 2 percent in the third only helps close the supply-demand gap. The key to a significant return to health in the seniors housing market is contingent upon factors that continue to plague the country. “We’re looking forward to employment growth, and recovery in the housing market, particularly as it pertains to sales prices, may factor in,” Harry says. “Home value has a high correlation with occupancy in seniors housing. So, we’re keeping close tabs on those economic factors as indicators of improvement within the sectors.”
Whether seniors housing has hit bottom or no, the sector is still regarded as a solid real estate investment. “Seniors housing has characteristics that should be attractive to investors plotting both ‘defensive’ and ‘offensive’ strategies,” Prudential Real Estate Investors notes in a report. “The income stream produced by senior housing is relatively stable compared to other property sectors. Meanwhile, the upcoming rise in the age 75-and-over population should produce strong demand for seniors housing facilities for the foreseeable future.”