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Trends in Seniors Housing

Guest post by: Carl Moore

Article Overview: The Outlook Across the nation’s metropolitan areas, seniors housing rent growth has slowed as occupancy rates have edged down. But by both measures, the sector has thus far avoided core commercial real estate’s more precipitous slump in fundamentals.

Trends in Seniors Housing



Across the nation's metropolitan areas, seniors housing rent growth has slowed as occupancy rates have edged down. But by both measures, the sector has thus far avoided core commercial real estate's more precipitous slump in fundamentals.

The relative stability of the seniors housing sector is in contrast with the continuing deterioration in core commercial fundamentals that has necessarily followed the inward shift of the economy's aggregate demand curve. Long-term, demographic trends will continue to support the seniors housing sector and fuel demand for new space. In the short- and medium-term, however, the downturn in the economy and housing market, and constraints on credit availability, still present challenges for the development and operation of seniors housing properties. Inevitably, these challenges are leading to more observable variation across operators of differing skill and experience.

In fact, the seniors housing occupancy rate rose in the third quarter as absorption surpassed completions for the first time in almost three years. Whether a trend of rising occupancy rates develops and can be sustained depends upon whether absorption holds up in parallel with the next year's elevated inventory additions. The National Investment Center for the Seniors Housing and Care Industry (NIC) announced the results of its third quarter property data collection and aggregation just before the Thanksgiving holiday. Both in terms of asking rents and occupancy rates, the seniors housing sector is able to boast broad-based, albeit modest, improvements in fundamentals in the three months ended September 30.

The occupancy rate of seniors housing increased by 30 basis points - rising to 88.4 percent - in spite of material additions to the national inventory. In fact, absorption strengthened markedly in the third quarter, eclipsing the trend rate of the previous three and a half years.

As the seniors housing occupancy rate has edged up, year-over-year asking rent growth has slowed but has remained positive and housing market trends and seniors housing performance, metro areas reporting the strongest rent growth include Baltimore, Boston, Philadelphia, Portland (Oregon), and St. Louis.

Retirement Communities The occupancy rate for continuing care retirement communities (CCRCs) with an entrance fee model increased by 20 basis points in the third quarter. In spite of a 410 basis point decline in peak-to-current occupancy rates, the average entrance fee increased by 0.9 percent from the second to third quarters. Entrance fees have trended up by 2.2 percent over the last year. Both in terms of occupancy rates and rent growth, entrance fee CCRCs continue to outperform rental retirement communities in spite of negative spillovers from the housing market.

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Article Tags: commercial real estates, measures, metropolitan areas, occupancy rates, seniors, slump



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