Market Signals 2009

Recently released 4Q09 NIC MAP data shows that the seniors housing occupancy rate in MAP 31 was 88.9%, which is down 40 basis points (bps) from 3Q09 and 120 bps from 90.1% in 4Q08. This marks the 10th time in the past 12 quarters the occupancy rate has fallen. But despite the quarterly decline there are signs that seniors housing occupancy rates may be bottoming.

One such sign is that absorption (the change in occupied units) has been positive for the past 3 quarters. Absorption from 2Q09 to 4Q09 has been 4,901 units, or 1,634 units per quarter. This is higher than the -1,091 units (or -218 units per quarter) absorbed during the five quarters preceding 2Q09.

During the past 3 quarters, inventory has grown by 8,872 units or 2,957 units per quarter. For the 5 quarter period before 2Q09 (1Q08 to 1Q09), inventory grew by 11,651 units or 2,330 per quarter.

While absorption is not rising to the level of inventory growth, it is rising. This is an important step if occupancy is indeed bottoming and could represent a turnaround of demand side fundamentals. Future market insights will further explore this topic.

Seniors Housing Occupancy Trends

To update your analysis of seniors housing properties in your market(s), please visit www.nicmap.org.

Recently released 4Q09 NIC MAP data shows how property level occupancy rates have changed since 1Q07. The recent cyclical high for seniors housing occupancy rates was in 1Q07. In that quarter, stabilized seniors housing properties in MAP 31 (31 largest metro areas) were 92.8% occupied. Since then, the occupancy rate has declined in all but one quarter (3Q09) leading up to 4Q09. During that time, the occupancy rate has declined by 390 basis points (bps) to 88.9% in 4Q09.

Since 1Q07 there has been a dramatic shift in occupancy rate distributions. Changes from 1Q07 to 4Q09 include:

• The percent of properties 95% to 100% occupied has fallen from 54% to 34%.
• The percent of stabilized properties at 80% or below occupancy has risen from 10% to 17%.

However, properties with 95%-100% occupancy continue to be the largest category of seniors housing properties.

Each quarter, NIC MAP provides occupancy distributions at the MSA level in the 31 largest MSAs. To update your analysis of seniors housing properties in your market(s), please visit www.nicmap.org.

Recently released 4Q09 NIC MAP data shows how wide ranging the seniors housing occupancy rate declines have been since the first quarter of 2007. 1Q07 is widely known as the recent cyclical high for seniors housing occupancy rates. In that quarter, stabilized seniors housing properties in MAP 31 (31 largest metro areas) were 92.8% occupied. Since, then the occupancy rate has declined in all but one quarter (3Q09) leading up to 4Q09. During that time, the occupancy rate has declined by 390 basis points (bps) to 88.9% in 4Q09.

The occupancy rate declines have touched virtually every market in MAP31. In fact, 30 of the 31 markets have seen their stabilized seniors housing occupancy rate decline since 1Q07. Las Vegas, the only market that has increased, is 84.3% occupied in 4Q09. Interesting facts on these occupancy rate declines include:

• 11 of the 31 markets have seen their occupancy rate decline in excess of 400 bps since 1Q07.
• Houston’s occupancy rate has declined by 720 bps going from 94.7% in 1Q07 to 87.5% in 4Q09.
• There are only 2 markets, in addition to Las Vegas, where the occupancy rate has declined by less than 100 bps since 1Q07; they are San Jose and New York.

Each quarter, NIC MAP provides insights, trends and analysis on over 12,300 properties on the 100 largest MSAs. To update your analysis of seniors housing properties in your market(s), please visit www.nicmap.org.

Recently released 4Q09 NIC MAP data shows that seniors housing rent levels are continuing to grow. As of the 4th quarter 2009, year over year (YOY) rent growth was 1.6%. YOY rent growth is a same store measure of asking rent data from seniors housing properties located in the 31 largest metro areas.

While rents are growing in seniors housing, the pace of rent growth has slowed considerably. The 1.6% YOY growth rate in 4Q09 compares to 2.9% in 4Q08, 3.9% in 4Q07 and 4.2% in 3Q07. The slowdown in the pace of rent growth is likely related to the economic slowdown and downturn according to preliminary research completed by NIC.

Despite the slowdown in the pace of rent growth, rents are still growing in seniors housing. This is a claim many other forms of real estate, specifically office and multifamily properties cannot make. 3Q09 data from the Mortgage Bankers Association and Property and Portfolio Research shows that YOY asking office rents are down 8.7% while multifamily asking rents are down 5.8%.

Each quarter, NIC MAP tracks YOY rent growth statistics for the 100 largest MSAs. To update your analysis of seniors housing properties in your market(s), please visit www.nicmap.org