Record Level of Inventory Growth Exceeds Increase in Demand by Nearly 80%
FOR IMMEDIATE RELEASE: July 12, 2018
Contact: Mary Ann Donaghy, 301-974-5797; madonaghy@nic.org
ANNAPOLIS, Md. – The occupancy rate for seniors housing across the United States continued to decline in the second quarter of the 2018, according to new data from the National Investment Center for Seniors Housing & Care (NIC), a non-profit organization that provides data and analytics on the sector.
Occupancy in U.S. seniors housing properties averaged 87.9% in the second quarter of 2018, down 0.4 percentage point from the prior quarter and down 0.8 percentage point from a year ago. The decline places occupancy at its lowest level since the first quarter of 2010 (86.9%). Current occupancy is 2.3 percentage points below its most recent high of 90.2% in the fourth quarter of 2014.
“The seniors housing occupancy rate has trended downward over the past 10 quarters, which is only 2 quarters short of its 12-quarter downturn during the Great Recession,” said Chuck Harry, NIC’s chief of Research & Analytics. “Although annual absorption has averaged a solid 2.4% during this 10-quarter downturn to date, the total number of seniors housing units absorbed amounts to only 63 percent of the significant and sustained inventory growth during this same period,” added Harry.
The occupancy rates for independent living and assisted living properties averaged 90.2% and 85.2%, respectively, during the second quarter of 2018. The occupancy rate for independent living was down 0.1 percentage point from the prior quarter and down 0.4 percentage point from a year ago. The occupancy rate for assisted living was down 0.6 percentage point from the first quarter. The occupancy rate for assisted living was down 1.1 percentage point from a year ago.
“The occupancy rate for assisted living was the lowest since NIC began to report the data in late 2005,” said Beth Burnham Mace, chief economist for NIC. “Inventory growth also set a record, with more than 4,400 units coming online. Demand accelerated from the first quarter’s flu-related weak levels but was not strong enough to offset growth in inventory.”
Seniors housing annual absorption was 2.4% as of the second quarter of 2018, up 0.3 percentage point from the first quarter of 2018 and down 0.1 percentage point from one year earlier. The seniors housing annual inventory growth rate in the second quarter of 2018 was 3.3%, up 0.2 percentage point from the first quarter.
Preliminary data on construction as a share of existing inventory for seniors housing was 6.3% in the second quarter of 2018 and was 0.7 percentage point below its recent high of 7.0% in the fourth quarter of 2017.
Seniors housing construction starts within the 31 Primary Markets during the second quarter of 2018 preliminarily totaled 4,083 units, which included 2,065 independent living units and 2,018 assisted living units. On a preliminary four-quarter basis, starts totaled 20,580 units. Construction starts data is often revised retrospectively in subsequent quarters as additional information becomes available.
During the second quarter of 2018, the average rate of seniors housing’s annual asking rent growth was 2.7%, up 0.3 percentage point from the prior quarter and down from a recent high of 3.7% in the fourth quarter of 2016. For comparison purposes, labor expense growth as measured by the annual change in assisted living average hourly earnings was 5.1% in the first quarter, according to the Bureau of Labor Statistics.
The nursing care occupancy rate decreased to 86.2% in the second quarter of 2018 from 86.5% in the first quarter of 2018. The nursing care annual inventory growth rate was -0.4% in the second quarter of 2018, while annual absorption was -0.8%. Private pay rents for the sector grew 2.4% year over year this quarter, down 0.3 percentage point from year-earlier levels.
A summary of the NIC MAP Data Market Fundamentals for 2Q18 is below. Additional details and a downloadable report can be found here.
[Note: For 2Q18 NIC MAP data specific to your local metro market, please refer to the regional key metrics charts.]
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About NIC
The National Investment Center for Seniors Housing & Care (NIC) is a 501(c)3 organization established in 1991 whose mission is to enable access and choice by providing data, analytics, and connections that bring together investors and providers. For more information, visit natinvcenterdv.wpengine.com, and follow NIC on Twitter and LinkedIn.