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Seniors Housing Penetration Rates: Variation over Time, Variation Across Metropolitan Markets

Penetration rates vary across markets and across time.  Some of the variation may be due to differing demand factors such as population and household growth and size, consumer preferences, familiarity and comfort with the product, changes in the composition of inventory, and cultural influences. This blog post explores some of this variation.

The chart above shows the ordinal ranking of occupancy rates and penetration rates for the Primary 31 markets for Majority Independent Living (IL) properties as of 2Q2018 from the NIC MAP® client portal. Although one might expect areas with high occupancy to also have high penetration, the data show that is not always the case and that there is variation in the relationship between occupancy rates and penetration rates.

Penetration rates over time: Some have risen, some have fallen.  An analysis of metropolitan market penetration rates across time that uses NIC MAP seniors housing inventory and occupancy data and time series household demographic data from the U.S. Census and Moody’s Analytics reveals interesting results1 This analysis calculates two types of penetration time series: occupied penetration (calculated as the number of occupied units divided by households age 75+) and supply penetration (open inventory divided by households age 75+). After calculating the supply penetration rate and occupied penetration rate time series for the Primary 31 Markets, we also calculated the respective changes from 4Q2006 to 4Q2016 for each metropolitan market.

The data show wide differences in penetration rates by geography, with high penetration rates for Majority IL, Portland, Oregon; Philadelphia; Kansas City; and Seattle ranked high, while Los Angeles; Riverside; New York; and Las Vegas ranked low.

The analysis also examined changes in occupied penetration rates across time by metropolitan market. For Majority IL, 17 out of the 31 Primary Markets saw decreases in occupied penetration rates in the 10 years ending in 2016, while the other 14 showed increases. For the aggregate Primary 31 Markets, occupied penetration remained flat at 5.6% for Majority IL.

Why have some markets experienced rising penetration rates, while others have not?  The answer reflects underlying supply and demand factors, such as a comparison of growth in inventory compared with growth in households over age 75, demand-related factors such as familiarity with the product, demographic patterns of both seniors and their adult children, and in some cases idiosyncratic factors unique to each metropolitan area such as cultural comfort with the product offerings.  Operator reputation in a market may also help explain penetration rates.  This variability reinforces how important it is to evaluate conditions at a local market level.

Conclusion.  Penetration rates and occupancy rates do not have a clear-cut relationship across markets.  Penetration rates can increase when inventory growth outpaces household growth. In some instances, this may result in falling occupancy rates; but in others, occupancy rates remain steady.  Factors such as familiarity with the product type, marketing and education efforts, operator reputation, growth in the number of seniors and their adult children, variation in population health needs, local cost of living, affordability of product, and perhaps climate, can also influence penetration rates. 


1 The Moody’s Analytics time series data for Households over age 75 based on the U.S. Census at this time is currently only available through 2016.

About the Author

Anne Standish, Research Statistician, NIC, and Beth Mace, Chief Economist and Director of Outreach, NIC

Anne Standish is a Research Statistician in the Outreach Group at the National Investment Center for Seniors Housing & Care (NIC). At NIC, Anne is an important contributor to NIC’s analytics and has been involved in a number of initiatives focused on the analysis of NIC’s seniors housing time series data. She is also a key contributor on NIC’s Actual Rates initiative. While working at NIC, she received her M.S. in Applied Statistics from Villanova University. She also has a B.S. in Psychological & Social Sciences from Penn State Abington. Prior to NIC, she worked in a range of academic research positions. Outside of having a passion for quantitative research methods and statistical analysis, Anne also has an interest in data visualization.

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.
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