November 8, 2013, Chicago, IL, NIC - In a sign that the economy continues to recover, the fundamentals for the seniors housing sector in the United States improved once again in the third quarter of 2013, according to information recently released by the National Investment Center for the Seniors Housing & Care Industry.
NIC released its most recent data on Oct. 10 at its 23rd annual national conference in Chicago. Perhaps most importantly, the national occupancy rate for seniors housing properties continues to rise, reaching 89.3% in the Q3 in the top 31 metropolitan areas of the country. That's an increase of 0.3% from the end of Q2 and up 0.5% year over year.
In the country's top 100 markets, the seniors housing occupancy rate was 89.7%. The lowest occupancy reached during the Great Recession was 86.9%, reported in Q1 2010.
Within the seniors housing sector, the occupancy rate for independent living facilities in Q3 was 89.4%, up from 88.8% in the same period in 2012. For assisted living facilities the occupancy rate stood at 89.1% for the quarter, an increase from the 88.7% rate of a year earlier. The occupancy rate for nursing care facilities was 87.6%, unchanged from Q2.
Meanwhile, as the fundamentals continue to improve, investor appetite is growing for seniors housing products. According to a panel of professionals that presented the data at the NIC conference, transaction volume topped $2.9 billion in Q3, up from $2.8 billion a year earlier. Panelists noted that seniors housing has been the most attractive property investment in 2013, topping a list that includes medical office, industrial, multifamily and retail.
"The private market is finally starting to see seniors housing as an attractive property type," said Jeff Theiler, an analyst for Green Street Advisors and who was on the NIC panel.
"There were 476 properties traded in the third quarter alone," added Chuck Harry, managing director at NIC.
The third quarter volume was highlighted by large acquisitions by the country's real estate investment trusts (REITs), such as Toledo, Ohio-based Health Care REIT (NYSE: HCN). Health Care REIT paid $173 million for 38 properties with 4,519 units from Merrill Gardens.
Panelists noted that the price per unit was $191,000, well above the typical price of $110,000 per unit, according to NIC data.
Even with demand remaining high for seniors housing, the NIC panelists noted that transaction levels and sales volumes should start to level off as the largest REITs take a closer look at their cost of capital in coming weeks and months. They also noted that construction levels are expected to increase, meaning the absorption rate would have to rise above the 1.9% absorption recorded in Q3.
John B. Mugford is the Editor of Healthcare Real Estate Insightsâ„¢, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.