Q2 rate across all senior product types was 87.9 percent – an eight-year low
By John B. Mugford
Senior housing occupancy rates across all product types have dipped to their lowest point in more than eight years, evidently because new construction has outpaced new demand.
Last month, we took a look at the falling occupancy rate specifically for skilled nursing facilities (SNFs), as reported by the National Investment Center for Seniors Housing & Care’s (NIC).
Now NIC has released its findings concerning occupancy rates for the whole senior housing sector – and the news is not good.
During the second quarter (Q2) of 2018, the occupancy rate for the country’s senior housing properties – which encompasses independent living and assisted living as well as skilled nursing – fell to 87.9 percent, down 0.4 percentage points from Q1, when the occupancy rate stood at 88.3 percent.
The Q2 occupancy rate was also down 0.8 percentage points from a year earlier in Q2 2017.
The quarterly decline for all senior housing properties puts the occupancy rate at the lowest level since Q1 2010, a time when the country was coming out of the Great Recession.
In a sector where occupancy rates do not fluctuate wildly, the recent occupancy rate is just 2.3 percentage points below it most recent high point of 90.2 percent, which took place in Q4 2014.
“The seniors housing occupancy rate has trended downward over the past 10 quarters, which is only two quarters short of its 12-quarter downturn during the Great Recession,” said Chuck Harry, NIC’s chief of research and analytics.
If there is a good sign in the latest data, according to Mr. Harry, it’s that the annual absorption rate has averaged a solid 2.4 percent during the current 10-quarter downturn in occupancy.
However, that absorption rate is being offset by what he calls a “significant and sustained” inventory growth of new properties. In short, the rate of new senior housing development has outstripped the pace of consumer demand in recent years.
As a result of that inventory growth, “the total number of seniors housing units absorbed amounts to only 63 percent of the significant and sustained inventory growth during this same period.”
That annual, or 12-month, inventory growth in Q2 was 3.3 percent, up from 3.1 percent in Q1 for all senior housing products.
As for the Q2 occupancy rates of the different property types within the senior housing sector.
The occupancy rate for independent living during Q2 was 90.2 percent, down just 0.1 percentage point from Q1 but down 0.4 percentage points from a year ago.
In assisted living, the news continues to be dire, as the Q2 occupancy rate of 85.2 represented a 0.6 percentage point drop from Q1 and a 1.1 percent decrease from a year earlier.
According to Beth Burnham Mace, the chief economist for NIC, the occupancy rate for assisted living was the lowest since NIC began to report such data in late 2005.
That falling occupancy rate for assisted living facilities was exacerbate by a high level of newly constructed facilities opening during Q2, as Ms. Burnham Mace noted that “inventory growth also set a record, with more than 4,400 units coming online.”
For the senior housing sector as a whole, construction starts in the country’s 31 primary markets in Q2 totaled 4,083 units, which included 2,065 independent living units and 2,018 assisted living units.
For the previous four quarters, based on preliminary data, construction starts totaled 20,580 units, according to NIC.
Those totals, the organization notes, are often revised as it gathers additional data.
For more on the Q2 senior housing occupancy report, and to download and abridge copy of the full report, please visit NIC.org.
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