The Seniors Housing Lending Environment:
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Our series of interviews with key industry leaders is taking a break for the holidays.
Look for an interview with Jerry Doctrow, Managing Director, Stifel, Nicolaus & Co.,
in the January 2009 edition of the NIC Insider.
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From the Research Director's Desk
by Lawrence J. Horan, Ph.D., NIC Financial Research & Analysis Director
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Since our last issue of From the Research Director’s Desk, the NIC MAP data
for 3Q08 has been released. It has shown a continued decline in occupancy rates for independent and
assisted living in the 31 Metro Markets tracked by the NIC MAP service. Nursing Care occupancy rates
also inched lower. REVPOR (revenue per occupied room) continued to grow at a healthy pace for all care
segments. The asset deflation that we have cited as a possible force behind weakening demand continued
into the fourth quarter with steep declines in stock prices in October and November. House price deflation
also continued in October with the National Association of Realtors reporting an 11.9% drop in house
prices versus a year ago. The National Bureau of Economic Research, the official recorder of the business
cycle, recently declared that the U.S. economy entered a recession in December 2007. On December 5,
the Bureau of Labor Statistics reported a 533,000 decline in nonfarm payrolls. According to the payroll
data, 2.05 million jobs have been lost in the last year. Almost three quarters of that decline occurred
in the last four months. The economic environment is deteriorating at a rapid and accelerating pace,
and the seniors housing and care industry has not been immune but has been holding up fairly well.
While other sectors of commercial real estate are under more pressure to reduce rates, the seniors housing
and care industry is still able to raise rates.
The first half of 2009 is expected by most economic forecasters to be a period of worsening economic
conditions and we should plan accordingly. Supply growth in the more discretionary types of seniors
housing is likely to be fairly robust for 2009 given what NIC MAP data shows in terms of units under construction;
but demand growth has slowed dramatically. NIC MAP data for 3Q08 tell us to expect supply growth of 2.7%
for IL and 2.0% for AL in 2009 (top 31 Metro Markets). Using 1Q07 as the reference point when the upturn
in occupancy rates ended, one can see from the accompanying table that absorption slowed dramatically
in the ensuing six quarters versus the prior six quarters. It could prove challenging for these units
in the construction pipeline to be absorbed in a timely fashion unless market conditions improve. The
removal of older units and properties will mitigate this challenge, as net supply growth would be
slower than the 2.7% or 2.0% imply.
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Seniors Housing & Care
Industry Calendar |
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January 2009:
- 8 NIC Executive Circle Webcast
- 12-13 ASHA Annual Meeting, Monarch Beach, CA
- 13 NIC Executive Committee & Conference Planning Committee Meetings, Monarch Beach,
CA
- 20-23 NAHB International Builders Show, Las Vegas, NV
- 26-27 AAHSA Leadership Summit, San Francisco, CA
February 2009:
- 10-13 Erickson School - “The Business and Strategy of Seniors
Housing & Care," Baltimore, MD
March 2009:
- 3 4Q08 NIC MAP Subscriber Webcast
- 11-12 NIC Western Regional Symposium, Hilton, San Diego, CA
- 24 Executive Circle Conference Call, 11:00 a.m. EST
- 24-27 Erickson School - “Sales and Marketing of Seniors Housing & Care," Baltimore, MD
- 29-31 2009 Environments for Aging Conference - Boston Copley Marriot, Boston, MA
Click here to suggest adding an event to this calendar.
(denotes NIC Events) |
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