NIC Research & Data
NIC MAP® Market Signals
1Q10 Market Signal: What's in Store for Seniors Housing Rent Growth?
A chief reason why seniors housing is viewed as “outperforming” other asset classes in recent times
is the fact that YOY rents are continuing to grow. NIC MAP has previously published data showing that
seniors housing YOY rent growth was 1.5%. This compares to data provided from the Mortgage Bankers Association
and PPR showing that office and multifamily YOY asking rents declined by 9% and 6%, respectively.
Although rents continue to grow, the pace of growth has slowed considerably. In fact, the pace of YOY
rent growth has slowed in each consecutive quarter since establishing a cyclical peak of 4.0% in 2Q07.
At 1.5% in 1Q10, we are left wondering if rent growth will slow further or even go negative in the near
term. A key way to tackle this question is to look at individual property distributions to see if any
patterns have emerged.
When trying to see if rents are declining it would be important to know if a large share of properties
are reporting a YOY decrease in rents. This is, in fact, not the case. The percent of properties reporting
a YOY decrease in rents was 13% in 1Q10. Further, the share of properties dropping rents has oscillated
between 9% and 15% since 4Q06 and is showing no evidence of increasing. While we have all heard the
“reports” of properties dropping rental rates, it is safe to say it is neither the norm nor an industry
wide trend.
What has changed is the share of properties not raising rents, or holding rents steady. This group is
represented by the percent of properties reporting YOY rent increases between 0% and 1%. This group
has seen their share rise from 20% in 2Q07 to 45% in 1Q10. This suggests that operators are pursuing
a strategy of “withholding rent increases”. This represents a significant share of all seniors housing
properties and is the predominant reason why YOY rent growth has slowed from 4% to 1.5%.
While it is difficult to predict exactly where and when YOY rent growth will bottom, it does appear
(based upon existing data) that rents will continue to grow.
Each quarter, NIC MAP reports rent distributions in each Metro Market Report. To purchase the report for your market please visit
www.nicmap.org.
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