Memory Care Market Trends: 3Q2017
As the seniors housing and care industry’s leading data provider, NIC tracks occupancy, rental rates, supply and construction data for independent living, assisted living, memory care, skilled nursing and continuing care retirement communities (CCRCs)/life plan communities (LPCs). Through the NIC MAP® client portal, subscribers have access to robust web-based tools and reports, including market-level summaries and historical time-series data for seniors housing supply and demand market fundamentals that can be accessed by filtering different data aggregations.
The following narrative shines a spotlight on Memory Care occupancy trends in the combined primary and secondary markets, which represent the aggregate of the data collected from 99 of the largest core-based statistical areas (CBSAs).
All the data reviewed herein was downloaded directly from the “Trends” tool on the NIC MAP® client portal, selected by “Community Type,” which is a new categorization whereby each community is classified by its plurality care segment (IL, AL, MC, or CCRC/LPC). The “Memory Care” selection by “Community Type” provides data that are mutually exclusive, allowing the analyst a quick and easy method for viewing Memory Care separately and apart from other community types that NIC reports.
Supply & Demand Fundamentals
Memory Care occupancy reported an upward trend due to strong net absorption over the prior two quarters, following six quarters of decline.
A review of the current third quarter 2017 data for the combined primary and secondary metropolitan markets tracked by NIC MAP® shows that Memory Care recently experienced an increase in occupancy, somewhat reversing a steep downward trend that began in the fourth quarter of 2015.
The recent rise in occupancy may be attributed to two consecutive quarters of strong net absorption coupled with slowing inventory growth over the previous three quarters. It is important to note that seasonality may also be a factor in the increase, as the data follows a pattern of absorption increases reported in the third and fourth quarters.
Current “all” occupancy (depicted by the green line) is 83.1%, up 1.8 percentage points from the all-time low reached in the first quarter of 2017 (81.3%), but down 5.5 percentage points from its all-time high reported in the third quarter of 2008 (88.6%).
Stabilized occupancy (depicted by the yellow line and defined as properties having reached 95% occupancy or open at least two years), declined as inventory growth increased, suggesting that recent development has played a part in eroding occupancy in stabilized properties.
Memory care development began to ramp up significantly in the fourth quarter of 2012, and inventory growth has exceeded net absorption in all but three quarters since then. Inventory growth has fallen since the fourth quarter of 2015 when it peaked at 1,569 units. In the third quarter of 2017, inventory growth (shown by the red bar) was at its lowest level in eight quarters, adding 450 units. Net absorption (shown by the blue bar), exceeded inventory growth by 595 units.
The following sections provide additional detail in the data by different slices.
Occupancy by Market Cohort
Occupancy differences between the primary and secondary markets are near cyclical high rates.
As of the third quarter of 2017, Memory Care occupancy was 83.9% for the primary markets and 81.5% for the secondary markets.
Memory Care occupancy in the primary and secondary markets has been tracking relatively closely since the first quarter of 2013, when the rates converged for three consecutive quarters.
More recently, the difference in occupancy rates has fluctuated by two to three percentage points.
Occupancy by Profit Status
For-Profit Memory Care communities are skewing overall occupancy lower.
Not-for-profit memory care occupancy is currently 6.7 percentage points higher than for-profit (89.5% vs. 82.8%).
The occupancy spread for not-for-profit and for-profit memory care communities in the combined primary and secondary markets has been growing since the second half of 2009. The greatest divergence in occupancy rates was reached in the second quarter of 2016 (11.4%). Since then, the differences have moderated to levels reached in 2015, prior to the fourth quarter 2015 spike in inventory growth.
Inventory Growth and Net Absorption by Profit Status
Memory Care inventory growth has shown recent signs of slowing, and for-profit absorption is increasing while not-for-profits saw a steep decline in absorption over the prior four quarters.
Annual inventory growth for for-profit Memory Care communities exceeded not-for-profit communities beginning in the fourth quarter of 2011, when the for-profits intensified development activity, and the not-for-profits experienced negative inventory growth for four consecutive quarters (negative growth is often a result of units being taken off line or shifted to another care segment). Since then, for-profit inventory growth has exceeded the not-for-profits in all but two quarters (the first two quarters of 2015).
Although for-profit inventory growth has been sustained, averaging about 11% since early 2013, not-for-profit inventory growth has been more variable.
Over the past four quarters, for-profit annual inventory growth declined after reaching its all-time high in the third quarter of 2016 (13.9%), and is currently at 9.3%. During the same timeframe, not-for-profit annual inventory growth declined from a recent high of 10.2%, but fell to -4.6% in the third quarter of 2017.
In summary, as of the third quarter of 2017,
- Memory Care occupancy recently showed an upward trend due to strong net absorption over the prior two quarters, following six quarters of decline.
- Occupancy differences between the primary and secondary markets are near cyclical high rates.
- For-Profit Memory Care communities are skewing overall occupancy lower.
- Memory Care inventory growth has shown recent signs of slowing, and For-Profit absorption is increasing while Not-For-Profits saw a steep decline in absorption over the prior four quarters.
Indeed, the “Trends Tool” in NIC MAP® can be used to gain great insight into market trends specific to Memory Care communities. Future blog posts will delve into occupancy, supply and demand data, comparing and contrasting the memory care component in “combined” communities and “stand-alone” memory care.