The Labor Department reported that there were a significant number of jobs added in January–304,000 and well above the consensus expectation of 172,000. This was the 100th consecutive month of job growth.  December was revised down to 222,000 from 312,000 and November was revised up to 196,000 from 176,000.

The 800,000 Federal workers going unpaid during the partial federal government shutdown were still counted as employed and as a result federal government payroll estimates were largely unchanged in January. In contrast, the uptick in the unemployment rate may have been influenced by the furloughed employees due to definitional differences in the household survey which is used to estimate the unemployment rate.

Indeed, the unemployment rate increased 0.1 percentage points from 3.9% in December and from a near-50 year low of 3.7% in November to 4.0% in January. Nevertheless, the jobless rate remains well below the rate of what is generally believed to be the “natural rate of unemployment” of 4.5%, which suggests that upward pressure on wage rates will continue. Further indications that this is in fact starting to occur were released in the report. Average hourly earnings for all employees on private nonfarm payrolls rose in January by three cents to $27.56. Over the past 12 months, average hourly earnings have increased by 85 cents, or 3.2%.

A broader measure of unemployment, which includes those who are working part time but would prefer full-time jobs and those that they have given up searching—the U-6 unemployment rate—rose to 8.1% in January from 7.6% in December.

In January, employment in health care rose by 42,000. In the past year, health care has added 368,000 jobs.

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work rose 0.1 percentage point to 63.2% in January, still very low but up from its cyclical low of 62.3% in 2015. The low rate at least partially reflecting the effects of an aging population.

Adding further evidence to the strong job market are unemployment insurance claims which recently reached a near 50 year.

In an announcement by Federal Reserve Chairman Powell this week, the Fed indicated that they would not be raising interest rates in the immediate future due to concerns about global economic growth and limited inflation. That said, the jobs report shows that the labor market remains robust. Further indications of strength in the economy could cause the Fed to raise rates sooner. In December, the Federal Reserve raised the fed funds rate by 25 basis points to a range of 2.25% to 2.50%. That marked the fourth increase in 2018. The Fed has now raised rates by a quarter percentage point nine times since late 2015, after keeping them near zero for seven years.

Expanding on a recent NIC Blog Post that detailed care segment occupancy across the NIC MAP^® 99 Primary and Secondary Markets within Continuing Care Retirement Communities (CCRCs, also referred to as life plan communities) compared with those in non-CCRC freestanding or combined communities, the second installment of this two-part blog post examines the regional occupancy performance of independent living, assisted living, memory care and nursing care segments within and across entrance fee and rental CCRCs.

The following narrative describes 3Q2018 CCRC occupancy aggregated from the NIC MAP Primary and Secondary Markets—99 of the nation’s largest core-based statistical areas (CBSAs), broken out across eight geographical regions. (Note that NIC MAP recently released data for 4Q2018). For the analysis, occupancy data for CCRCs, both entrance fee (EF) and rental payment CCRCs was considered. CCRC segments inventory was comprised of 63.3% entrance fee and 36.7% rental payment models in 3Q2018. The occupancy rate used was the “all occupancy” rate which includes properties still in lease-up as well as stabilized properties.

Entrance Fee CCRCs vs. Rental CCRCs

Entrance fee CCRCs generally had higher occupancy than rental CCRCs, with some variability by care segment and by geographic region. Entrance fee CCRC occupancy was 3.3 percentage points higher than rental CCRCs in the third quarter of 2018 (92.1% vs. 88.7%). Across regions, entrance fee CCRCs led rental CCRCs by 2.8 percentage points in the independent living segment (93.0% vs. 90.2%), 1.6 percentage points in the assisted living segment (91.9% vs. 90.3%), 3.8 points in the memory care segment (90.9% vs. 87.2%), and by 2.5 percentage points in the nursing care segment (89.3% vs. 86.8%). Note: the referenced percentage point differences were rounded.

• Independent living segment occupancy was the highest in the Mid-Atlantic region for both entrance fee CCRCs (95.1%) and rental CCRCs (93.2%). The largest differences in independent living segment occupancy between entrance fee and rental CCRCs was reported in the Mountain region (8.4 percentage points). Independent living segment occupancy was slightly higher in rental CCRCs than entrance fee CCRCs in the Southeast region (by a one percentage point difference).
• Assisted living segment occupancy was the highest in the Northeast for rental CCRCs (93.7%) and the West North Central and Northeast regions for entrance fee CCRCs (93.4% and 93.3%). Rental CCRCs had higher assisted living segment occupancy than entrance fee CCRCs in the Southwest, Southeast and Northeast regions. The largest differences in assisted living segment occupancy between entrance fee and rental CCRCs was reported in the Mountain region (10.9 percentage points).
• Memory care segment occupancy was highest in the East North Central and Mid-Atlantic for entrance fee CCRCs (94.4% and 93.4%) and the Northeast and Southwest for rental CCRCs (94.0% and 93.6%) but was particularly low for rental CCRCs in the Mountain region (69.1%). The largest differences in occupancy between entrance fee and rental CCRCs was reported in the Mountain region (17.3 percentage points) and Pacific region (11.9 percentage points), where entrance fee CCRC occupancy was higher than rental CCRCs, and in the Southwest, where rental CCRC occupancy was 11.0 percentage points higher than that for entrance fee CCRCs.
• Nursing care segment occupancy was highest in the Northeast for both entrance fee and rental CCRCs (92.9% and 91.8%). Occupancy was particularly low in the Mountain region for rental CCRCs (76.4%). Rental CCRCs had higher nursing care segment occupancy than entrance fee CCRCs in the Pacific and Southeast regions. The largest difference in nursing care segment occupancy between entrance fee and rental CCRCs was noted in the Mountain region (11.2 percentage points).

Higher occupancy in entrance fee CCRCs may be due in part to higher rates of resident turnover in rental-model CCRCs, according to data from ASHA’s State of Seniors Housing, 2018 database. While communities with rental CCRC payment plans offer monthly or annual leases for housing and services, entrance fee CCRCs include contract stipulations such as refund percentage and timing of refund, which may help retain residents who put down a sizable up-front fee to reside in a CCRC. An additional reason for higher occupancy rates in entrance fee CCRCs may be due in part to the fact that the majority of entrance fee CCRCs are nonprofit organizations (72.6%). According to NIC MAP, nonprofit CCRC occupancy in the Primary and Secondary Markets has consistently exceeded that of for-profit CCRCs by more than four percentage points since 2Q15.

However, product differences are unlikely to tell the whole story. Further analysis is needed to more fully explain CCRC segment occupancy performance by payment plan and by region. In addition to local economic drivers, income levels, inflation-adjusted purchasing power, and penetration rates, other contributing factors that could be explored include inventory growth patterns, consumer acceptance of the entrance fee model, and the health of the residential housing market—specifically as it relates to entrance fee CCRC occupancy performance since often CCRCs target upfront fees to local home sales prices near or around the median to enable consumers to fund a move with a near one-to-one exchange.

(Double-click the image below to enlarge.)

NIC MAP^® Data Service clients attended a webinar in mid-January on the key seniors housing data trends during the fourth quarter of 2018.  Key takeaways included the following:

Takeaway #1:  Seniors Housing Occupancy Edges Up, but Remains Soft

• The all occupancy rate for seniors housing, which includes properties still in lease up, inched up to 88.0% in the fourth quarter from the seven-year low of 87.9% in the third quarter.  The fourth quarter rate was 70 basis points below its level of 88.7% in the fourth quarter of 2017.
• During the quarter, net absorption totaled 5,149 units, the greatest number of units absorbed in a single quarter since NIC began reporting the data in the first quarter of 2006. Historically, we often see a bounce up in demand in the fourth quarter from the third quarter and often the fourth quarter is the strongest quarter of the year.
• On a quarterly basis, there were 5,341 units added to inventory in the quarter, not as much as the record pace of 6,400 units reached two years ago, but still a lot by historical norms (3,100 units per quarter on average since 2006).

Takeaway #2:  Median Occupancy Has Never Been Below 90%

• The median occupancy rate was more than four full percentage points above the all occupancy rate in the fourth quarter of 2018. It has averaged 350 basis points above the all occupancy rate since 2006 and has never fallen below 90%.
• The difference between the median and all occupancy rates can be traced to the fact that poorer performing properties pull down the average occupancy rate. Many institutionally-owned seniors housing properties benchmark to the median occupancy because of this fact.

Takeaway #3:  Record Inventory Growth and Absorption for All of 2018 for Assisted Living

• For all of 2018, assisted living net absorption equaled 9,283 units, the most in any year since at least 2006.
• Inventory growth also reached a record high of 13,670 units in 2018, making the gap between net absorption and inventory growth equal to 4,387 units, a bit less than the annual results for 2017 (4,473 units), but still very wide.
• Note the wide difference between stabilized and non-stabilized occupancy rates—nearly 320 basis points. This stems from the large number of units that have come online but are not yet leased up.
• It is also notable that net absorption equaled 3,743 units in the fourth quarter, which made the fourth quarter of 2018 the strongest quarter for net demand on record and more than three times the average net quarterly absorption since the time series began to be reported in the first quarter of 2006.
• Occupancy remains very low at a rate of 85.4% during the fourth quarter, which was unchanged from the third quarter.  In the second quarter, the rate had reached an all-time low of 85.3%.

 Takeaway #4 Construction Starts Trending Lower

• A key takeaway from the recent data is a slowdown in the four-quarter moving sum of starts for both majority independent living and majority assisted living. Indeed, in the fourth quarter, assisted living starts totaled nearly 1,552 units, the fewest starts since the first quarter of 2012.  On a four-quarter aggregate basis, starts totaled 9,393 units, the fewest since 2014.  As a share of inventory, this amounted to 3.3%.  The last time it was below 4% was 2012.
• For independent living, starts on a rolling four-quarter basis, totaled 7,287 units in the fourth quarter. As a share of inventory, this equaled 2.2%. The last time it was below 2% was 2014.
• It’s worth noting that this data often gets revised up or down in subsequent quarters, due to inherent lags in reliably collecting this often hard-to-capture data.

Key Takeaway #5:  Seniors Housing and Care Transaction Volumes Less in 2018 Than In 2017

• Preliminary data shows that seniors housing and care transactions volume registered $12.3 billion in 2018. This  includes $7.1 billion in seniors housing and $5.2 billion in nursing care.  The total volume was down 23.4% from the previous year’s $16.1 billion and down 15% from 2016 when volume came in at $14.6 billion.  Total annual closed transactions  volumes have not been less than $13 billion since 2012.
• The institutional buyer type represented 17% of the $12.3 billion in closed transactions in 2018 as its total closed dollar volume decreased by 59% from 2017 when it represented 32% of volume and closed $5.2 billion in transactions. However, 2017 was represented in a significant way by Blackstone when they closed some larger deals over $500 million.
• The public buyer share of volume increased from 25% in 2017 to 32% in 2018. In terms of the dollar volume, it held relatively steady as the public buyer closed $4 billion in both 2017 and 2018.  In 2018, the volume was carried by the Welltower/QCP deal and in 2017 it was carried by the SABRA/Care Capital Properties deal.   The public buyer has averaged $3.8 billion in closed transactions per year over the last three years.
• The private buyer continues to be the most consistent and steady source of capital as it registered over $5 billion in closed transactions in 2018 at $5.2 billion. It represented 42% of all volume in 2018, which was up from 34% in 2017, when it closed $5.5 billion in transactions.  Over the past three years, the private buyer has averaged $5.5 billion and it has closed above $5 billion in transactions for five straight years.
• Cross-border activity has seen a steady decrease in dollar volume since 2015 when it registered $2.1 billion. It has averaged about 5% of volume over the past three years and closed $500 million in 2018, which was down from 2017’s $900 million.

As our healthcare system continues to shift from the  fee-for-service payment and delivery model to a value-based system, the seniors housing and skilled nursing sector will increasingly experience significant change. Not only policy, but demographic change, workforce issues, evolving consumer expectations and the dynamics of competitive markets are beginning to drive a period of disruption featuring a host of new challenges – and exciting opportunities – for the sector. 

Perhaps chief among these is the emerging need for seniors housing and care owners, operators and investors to collaborate with the healthcare system. Upstream and down, players across the spectrum of healthcare are already beginning to take an interest in bringing their services into the homes of the elderly, particularly those high-need high-cost seniors that account for the lion’s share of healthcare costs in the US. Not to do so will make it all the more difficult for them to be successful. 

Of course, this may be unfamiliar ground for many in the seniors housing and skilled nursing sector and its prospective partners in healthcare. They have as much to learn about each other as they have a pressing need to do so. That is why NIC just launched seniorcare.nic.org. This microsite is designed to inform, and to encourage contributions from leaders across both healthcare and seniors housing and care. The site offers a wealth of thought-leadership, with curated news, op-eds, case studies, white papers, videos, and other materials, all focused on the realities of healthcare collaboration with seniors housing and care.  

In addition to frequent updates to news and educational materials, the site features the Housing and Healthcare blog, focused on the challenges, opportunities, news, and practical realities that decision-makers are encountering on this topic. NIC is inviting those with expertise and experience to submit their blog post ideas via the site’s simple submission form. Weekly posts will feature these industry insights, as well as our own observations, interviews, and analysis. The more perspectives and voices the blog reflects, the more it will become an essential – and unique – resource. 

Recent headlines, which can be found on the site’s Resources page, reflect an accelerating spate of merger and acquisition activity, much of which features new partnerships across old silos. Leading journals are publishing more news and analysis on the emerging need to deliver healthcare services to seniors beyond traditional retail and healthcare venues. Stories on corporate efforts to capture the promise of added value and cost-savings through new value-based partnerships are on the rise. Every headline to be found on seniorcare.nic.org links to a story that is relevant to our sector. 

The site also offers information and links to a growing number of events that are highly relevant to the concept of collaboration across housing and healthcare. The 2019 NIC Spring Conference, in particular, has a focus on the thesis, and has been attracting a small but growing cadre of leaders from the healthcare industry.  In service to our mission, NIC has made relevant conference content available on this microsite as well, to help encourage education and the sharing of ideas. Organizers may submit information for relevant upcoming events through the site, for inclusion. 

Anyone interested in thought-leadership, ideas, analysis, and even networking opportunities concerning collaboration between the seniors housing and care and healthcare sectors will value the content now available to them via seniorcare.nic.org. In a time of rapid change, information, ideas, news, and opportunities to make new connections can be essential to success. Beyond the challenges, real opportunities exist, promising improved outcomes, as well as greater access and choice for America’s seniors. And that matters.

Expanding on a recent NIC blog post that detailed care segment performance in the NIC MAP® 31 Primary Markets since the most recent Q42014 market cycle peak, and another blog post that went a step further and examined segment market fundamentals within Continuing Care Retirement Communities (CCRCs, also referred to as life plan communities) compared with those in non-CCRC freestanding or combined communities, the following narrative describes 3Q2018 CCRC occupancy aggregated from the NIC MAP Primary and Secondary Markets—99 of the nation’s largest core-based statistical areas (CBSAs), broken out across eight regions.

This analysis is useful for understanding the regional occupancy performance of independent living, assisted living, memory care and nursing care segments. The occupancy rate used was the “all occupancy” rate which includes units still in lease-up as well as those occupied.

Regional CCRC Care Segment Occupancy

Overall, the Northeast and Mid-Atlantic regions had the strongest performance in terms of CCRC occupancy across care segments, whereas the Mountain and Southwest regions performed relatively weaker.

• The Mid-Atlantic had the highest CCRC independent living segment occupancy (94.8%), followed by the Northeast and Pacific regions (93.7% and 93.5%, respectively). The Southwest region had the lowest CCRC independent living occupancy (88.6%).
• The Northeast had the highest CCRC assisted living occupancy (93.4%), followed by the Atlantic region (92.2%). The lowest CCRC assisted living occupancy was reported for the Mountain and Southwest regions (85.2% and 86.4%, respectively).
• Regarding CCRC memory care segment occupancy, the East North Central and Northeast had the highest (92.4% and 92.1%, respectively), whereas the Mountain region had the lowest memory care CCRC occupancy (77.9%).
• CCRC nursing care segment occupancy was highest in the Northeast (92.4%), while the Mountain and Southwest regions reported the lowest CCRC nursing care segment occupancy (80.5% and 81.2%. respectively).

CCRC Segments vs. Non-CCRC Segments

Across all regions, 3Q18 CCRC occupancy in the 99 Primary and Secondary metropolitan markets was 90.8%; five percentage points higher than non-CCRCs (85.8%). Generally speaking, this difference is perhaps due in part to the CCRC product profile, which tends to attract planners who wish to make one move to a continuum of care, or perhaps because new CCRC residents are generally healthier than residents in other types of seniors housing, resulting in lower resident turnover in CCRCs. Another potential reason for the difference is perhaps due to the inventory mix in the CCRC analysis aggregation (both entrance fee and rental payment options, combined). Note that 98.8% of non-CCRC segments were rental, whereas CCRC segments were comprised of 63.3% entrance fee and 36.7% rental payment models.

Interestingly, across care segments, occupancy at CCRCs was also generally higher than non-CCRCs. By care segment, the greatest differences in occupancy rates for CCRCs compared with non-CCRCs were reported for the memory care segment (6.7 percentage points), followed by the assisted living segment (5.4 percentage points), and the narrowest for the nursing care segment (2.6 percentage points).

• Independent living segment occupancy was three percentage points higher for CCRCs than non-CCRCs (92.3% vs. 89.3%). The greatest differences in CCRC independent living segment occupancy compared with non-CCRCs was reported for the Mid-Atlantic region (5.6 percentage points) and the East North Central region (4.1 percentage points).
• Assisted living segment occupancy was more than five percentage points higher for CCRCs than non-CCRCs (91.2% vs. 85.8%). The greatest differences in CCRC assisted living segment occupancy compared with non-CCRCs were found in the Mid-Atlantic and Southeast regions (differences of 7.8 and 7.7 percentage points, respectively), although large differences were also noted for the East North Central and Southwest regions.
• Memory care segment occupancy was more than six and a half percentage points higher for CCRCs than Non-CCRCs (89.4% vs. 82.7%). The greatest differences in CCRC memory care occupancy compared with non-CCRCs was found in the East North Central region (12.0 percentage points), the Southwest region (10.0 percentage points), and the Mid-Atlantic region (9.6 percentage points).
• Nursing care segment occupancy was about two and a half percentage points higher for CCRCs than non-CCRCs (88.0% vs. 85.3%). The West North Central and Southwest regions had the greatest differences in CCRC nursing care segment occupancy compared with Non-CCRCs (7.2 and 7.0 percentage points, respectively).

Non-CCRCs had higher occupancy than CCRCs in the following care segments by region: independent living in the West North Central region (a difference of 1.8 percentage points), memory care in the Mountain region (a difference of 3.1 percentage points), and nursing care in the Mountain and Pacific regions (differences of 1.1 and 0.6 percentage points, respectively).

Further analysis is needed to more fully explain regional differences in CCRC occupancy performance in comparison to non-CCRC segments. Contributing factors that could be explored include economic drivers such as industry mix, cost of doing business and living costs, employment growth, the health of the residential housing market in terms of home sales prices and velocity. Other considerations include income levels, inflation-adjusted purchasing power, prospective resident educational profiles, product acceptance and familiarity as well as penetration rates, longevity of the CCRC product in the area, and cultural differences.

The second installment of this two-part blog post will compare the regional occupancy performance of entrance fee and rental CCRCs.