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Five Key Takeaways from NIC MAP’s Second-Quarter Seniors Housing Data Release

Last week, NIC MAP® Data Service clients attended a webinar on seniors housing market trends through the second quarter of 2017. Key takeaways included:

Takeaway #1: Seniors housing occupancy fell 50 basis points to 88.8%

  • The all occupancy rate for seniors housing, which includes properties still in lease up, was 88.8% in the second quarter, down 50 basis points from the first quarter. This placed occupancy 190 basis points above its cyclical low of 86.9% during the first quarter of 2010 and 140 basis points below its most recent high of 90.2% in the fourth quarter of 2014. The quarterly decrease in occupancy stemmed from an increase in inventory of nearly 6,600 units, which outpaced a change in net absorption of 3,000 units. As the chart shows, the increase in inventory was the biggest jump in a single quarter since NIC MAP began reporting the data in the fourth quarter of 2005. It is notable that the difference between total occupancy and stabilized occupancy was 160 basis points, the widest differential since mid-2009. The size of this gap reflects the large number of properties recently opened and still in lease up.

Takeaway #2: Assisted living occupancy fell to its lowest level since 2009

  • Inventory growth has been ramping up for a much longer period for assisted living than for independent living. As of the second quarter, annual inventory growth of assisted living reached 5.9%–its highest level since NIC began reporting the data in 2006.  This has put significant downward pressure on assisted living occupancy which stood at 86.5% in the second quarter. Annual absorption also accelerated in the second quarter to a pace of 4.3%. That put annual absorption also at its highest rate since NIC began reporting the data.

Takeaway #3: Seven markets saw gains in inventory of more than 10%

  • During the past year, there have been nearly 35,000 units added to the stock of seniors housing inventory among the Primary and Secondary markets. Roughly 30% of this growth occurred in seven metropolitan markets: Dallas, Chicago, Minneapolis, Atlanta, Houston, Miami, and Boston. Dallas and Minneapolis alone accounted for 12% of all new seniors housing inventory in the past 12 months.
  • Relative to each metropolitan market’s own inventory, there were seven markets that experienced gains in inventory of more than 10% over the course of the year. They included New Orleans, Salt Lake City, Albuquerque, Austin, Melbourne, Jacksonville and El Pasoo.

Takeaway #4: Annual same-store rent growth remains strong

  • Same-store asking rent growth for seniors housing was generally strong in the second quarter, with year-over-year growth of 3.4%. This was down from 3.8% in the second half of last year, but was well above the 2.6% average pace experienced since late 2006.
  • Asking rent growth for assisted living (orange line) was 3.3% for the second quarter, up 20 basis points from the first quarter. For independent living (blue line), rent growth decelerated to 3.5% from 3.6% in the first quarter and down from 4.2% in the third quarter of 2016, when rent growth reached its highest pace since NIC began collecting this data.
  • There is wide variation in rent growth, however.  Detroit, San Jose, St. Louis, Sacramento and Seattle all experienced rent growth in excess of 5% from year-earlier levels.  Miami, Dallas, San Antonio, Kansas City and Cleveland, all experienced rent growth of less than 2%. Cleveland was up by only 0.6%.
  • Compared with the 3.3% year-over-year increase in assisted living rents, average hourly earnings were up 4.2% for assisted living employees as of Q1 2017, according to data tracked and monitored by the U.S. Bureau of Labor Statistics.

Takeaway #5: Closed transaction volume slows in second quarter

  • Although some large deals have been announced over the past couple months, the deal volume that actually closed in the second quarter, based on preliminary figures, was relatively weak. In fact, the second quarter represented the lowest closed transaction volume since the first quarter of 2012. Transaction volume for seniors housing and care totaled $1.4 billion, with $873 million in seniors housing and $573 million in nursing care.
  • The rolling four-quarter total of seniors housing and care volume registered $14.1 billion, but was still down 8% on a quarter-over-quarter basis and 5% on a year-over-year basis.

About the Author

Beth Burnham Mace

Beth Burnham Mace is the Chief Economist and Director of Outreach at the National Investment Center for Seniors Housing & Care (NIC). Prior to joining the staff at NIC, she served as a member of the NIC Board of Directors for seven years and chaired NIC’s Research Committee. Ms. Mace was also a Director at AEW Capital Management and worked in the AEW Research Group for 17 years. Prior to joining AEW in 1997, Ms. Mace spent ten years at Standard & Poor’s DRI/McGraw-Hill as the Director of the Regional Information Service. She also worked as a Regional Economist at Crocker Bank, the National Commission on Air Quality, the Brookings Institution and Boston Edison.

Ms. Mace is a member of the National Association of Business Economists (NABE), the Urban Land Institute (ULI), ULI’s Senior Housing Council and New England Women in Real Estate (NEWIRE/CREW). In 2014, she was appointed a fellow at the Homer Hoyt Institute and was awarded the title of a “Woman of Influence” in commercial real estate by Real Estate Forum Magazine and Globe Street. Ms. Mace is a graduate of Mount Holyoke College (B.A.) and the University of California (M.S.). She has also earned The Certified Business Economist™ title (CBE) from the National Association of Business Economists (NABE). Ms. Mace is often cited in the Wall Street Journal, the New York Times, Seniors Housing Business, Seniors Housing News and McKnight’s Senior Living and has a bi-monthly column in the National Real Estate Investor.