Occupancy rates fell for independent living and rose for assisted living in the second quarter of 2010, while the pace of rent growth slowed markedly, according to a recent analysis.
The Annapolis, Md.-based data and analysis service of the National Investment Center for the Seniors Housing & Care Industry also found the first increase in trailing-12 month (TTM) construction starts since the first quarter of 2009 for senior housing (both independent and assisted living properties). This is due to construction beginning on several entrance-fee CCRCs.
According to the analysis, the average occupancy rate for assisted living properties in 2the second quarter of 2010 was 88.3 percent, up from 87.8 percent in the firs quarter of 2010 and the same quarter a year ago. Conversely, occupancy rates fell to 87.4 percent for independent living properties during the second quarter of 2010, down from 87.5 percent in the first quarter and 88 percent a year ago.
"Although the occupancy rate for independent living is still declining, there are some signs that it may be at or nearing its cyclical bottom," said Michael Hargrave, vice president of NIC MAP. "For example, during the last year the independent living occupancy rate is down 0.6 percentage points, compared to the previous four quarters when it was averaging a decline of 1.85 percentage points."
The study also shows that the skilled nursing occupancy rate was 88.6 percent in 2the second quarter of 2010, down from 88.9 percent in th first quarter and 89.2 percent in the second quarter of 2009.
"Skilled nursing trends continue to show both declining absorption and declining inventory growth," Hargrave said.
One of the key drivers of the recent stabilization in occupancy rates appears to be a return to positive absorption, officials say. Annual absorption, which was 0.0 percent in the second quarter of 2009, now stands at 1.7 percent in the second quarter of 2010 for senior housing properties.
Other findings include:
- Rent growth for senior housing in the second quarter of 2010 was still positive, although it slowed markedly compared to previous quarters.
- The average monthly rent (AMR) per unit was $2,705 for independent living and $3,525 for assisted living.
- For both types of properties, the year-over-year rent growth was 0.7 percent.
- The year-over-year rent growth in the first quarter of 2010 was 1.6 percent for independent living and 1.4 percent for assisted living.
"This reflects an increase in the percentage of operators who are telling us that they are adjusting their market rents," said Hargrave. "In the second quarter of 2009, the percentage of properties that reported a decline in year over year rents was 9.1 percent. Now, a year later, that number is 15.7 percent."
In contrast, there was no slowdown in the growth rate for private-pay AMR for skilled nursing during the second quarter of 2010. For this quarter, the AMR was $7,979, compared to $7,734 during the second quarter of 2009.
For independent living, TTM construction activity was 1.1 percent of existing inventory during the second quarter of 2010, compared to 0.9 percent in the first quarter and 1 percent a year ago. TTM construction activity was also 1.1 percent in 2the second quarter of this year for assisted living, compared to 0.9 percent in the first quarter and 1.3 percent during the sceond quarter of last year.
"This quarter we saw an increase in the level of construction starts for seniors housing," said Hargrave. "The 1,659 seniors housing units that were started in the second quarter of 2010 represent a 52 percent increase over the average number of starts per quarter during the previous four quarters. However, a majority (56 percent) of the starts are due to several not-for-profit tax-exempt bond financings which had been delayed by the frozen credit market for tax exempt bond financing."
For skilled nursing, TTM construction activity was 0.3 percent in ther second quarter of 2010, which was the same as the previous quarter and the second quarter of a year ago.