January 11, 2015, Cassandra Dowell, Senior Housing News - The average occupancy rate for seniors housing properties in the fourth quarter of 2014 was 90.5%, showing an increase from the year prior, according to data released by National Investment Center for Seniors Housing & Care (NIC) on Friday.
By property type, independent living occupancy outpaced that of assisted living during the quarter.
The fourth quarter average occupancy rate showed an increase of .2 percentage points from the prior quarter and a .9 percentage point increase from a year earlier, NIC data show. As of the fourth quarter of 2014, occupancy was 3.6 percentage points above its cyclical low of 86.9% during the first quarter of 2010.
Seniors housing annual absorption was 2.7% as of the fourth quarter of 2014, compared to 2.9% during the third quarter of 2014 and 2.2% during the fourth quarter of 2013.
And while NIC predicts the market will continue to gain traction in 2015, one unpredictable variable could stunt further growth: the flu.
"Our current forecast calls for independent living occupancy to improve by 20 basis points in the first quarter and assisted living occupancy to gain 10 basis points," Chris McGraw, NIC's senior research analyst, tells SHN, adding that the forecast calls for similar rates of inventory growth and absorption for both property types that was seen in the fourth quarter of 2014. "One of the biggest wild cards for [the first quarter of 2015] is probably the severity of the flu season; back in [the first quarter of 2013] we did have an unanticipated drop (20 basis points) in assisted living occupancy due to the exceptionally severe flu season."
In the fourth quarter the occupancy rate for independent living outpaced that of assisted living, averaging 91.3% and 89.3% respectively.
When compared to the prior quarter, independent living occupancy increased by .4 percentage points, while assisted living occupancy remained flat, data show. The occupancy rate for independent living is now 4.5 percentage points above its cyclical low, while the occupancy of assisted living is 2.8 percentage points above its respective cyclical low.
"The improvement in seniors housing occupancy rates in the fourth quarter is good news and highlights the effects of the strengthening economy and growing consumer confidence levels on demand for properties that provide personal care, housing and socialization for today's elders," says Beth Mace, NIC's chief economist, in a statement.
Supply is one of the biggest distinguishing factors contributing to the slower recovery of assisted living compared to that of independent living, McGraw says.
In the past year, inventory grew by 3.3% in assisted living versus just .6% for independent living, data show.
"Absorption has been running much stronger for assisted living than independent living, but independent living's supply has been so much more tempered that is has allowed it to recover at a faster rate," he says. "If you strip supply out of the equation and only look at stabilized assets, you will see that assisted living occupancy has recovered to its pre-recession peak while independent living is still about 200 basis points from its peak."
Freestanding memory care occupancy also grew in the fourth quarter, rising 80 basis points to 86.3%.
"Its supply has grown rapidly over the last few years, causing its overall occupancy to dip well below that of the other seniors housing property types," McGraw says, adding that stabilized assets were at 90.6% as of the fourth quarter of 2014, up from 90.5% in the third quarter of 2013.
The nursing care occupancy rate was unchanged at 88.3% in the fourth quarter of 2014.
The rate of seniors housing's annual asking rent growth remained unchanged at 2.3% from the prior quarter and was .7 percentage points above its pace one year earlier during the fourth quarter of 2013, during the fourth quarter of 2014.
Annual inventory growth showed a marginal decrease in the fourth quarter, slowing to 1.7% from 1.8% during the prior quarter, according to NIC data. Current construction as a share of existing inventory for seniors housing was 3.5%, which is .1 percentage points below that of the previous quarter.