Good Occupancy News From NIC

October 11, 2019, Ben Swett, SeniorCare Investor - There was some good news on the occupancy front, according the data just released from NIC MAP, but the assisted living sector isn’t out of the woods yet.  Sequentially, seniors housing (including independent living and assisted living) saw a 30-basis point increase in occupancy to 88.0% for properties in the top-31 primary metropolitan markets.  For primary and secondary markets combined, the increase was slightly more moderate at 20 basis points, sequentially, to 87.8%.

When separating out the community types, independent living saw a 20-basis point increase to 90.2%, while assisted living rose 30 basis points to 85.4%.  For stabilized seniors housing properties, occupancy grew to 89.8%, a 20-basis point sequential increase.  There is still a long way to go for AL, as we are just 30 basis points off the record-low average occupancy of 85.1%, but we’ll take the good news.

However, rent growth was relatively stagnant in the assisted living sector, rising just 2.3%, versus 3.0% for independent living.  With occupancy so low, there is only so much pricing power these communities have.  We hear that discounting is still rampant across the industry, which is not good news considering these communities have to keep up with rising wages that are only made worse in markets that have seen a lot of development.

Looking to the future, there are reasons to be somewhat optimistic.  According to NIC MAP, absorption topped inventory growth; 4.4% versus 4.2%, respectively, for assisted living, and 2.0% versus 1.8% for independent living.  We’re a little suspect of those inventory growth numbers, as we believe they may be underrepresenting the real development pace out there, based on the numbers and “talk” at the recent NIC conference.  But if construction is indeed slowing down, as we have been hearing, then we may see rising census levels.

We should note that we have seen these kind of sequential occupancy increases in third quarters before.  That means we are holding our breath the Q4 and Q1 numbers to come out, when rough winter weather and the omnipresent flu season may drag occupancy down.  Sorry to end on that.