Some good news was recently released by NIC MAP, showing occupancy rates for stabilized seniors housing communities (independent living and assisted living) increasing by 10 basis points sequentially, but a four-basis point decline year over year. The assisted living market, which has been the most troubled over the past several years, saw a 20-basis point increase sequentially, but a 14-basis point decline year over year. The bottom line is that while some progress has been made recently, we are still way behind a year and two ago, with a long way to go to really get to “stabilization” as an industry.

The other good news is that absorption is running ahead of trailing-12 month new construction starts, 2.9% vs 2.6%. This trend has to continue for many more quarters to really have a major impact. The “problem” is that as the market improves, the current yellow light on new development will change to a green light as investors, developers and providers decide it is safe to get back in and not miss the market upswing. How much of an increase in development there might be is impossible to predict, but each year we get closer to 2030, when the older baby boomers start to turn 85, we may see the froth return to the market. 

Some of the bad news was that asking rent growth for assisted living declined 40 basis points to 2.5% year over year, while IL also declined by 40 basis points to 2.9%. The actual rents are certainly lower given the discounting that still goes on because of the competitive nature of the market with new openings. Even with these small increases in occupancy, expenses are still outpacing revenues growth, cutting into margins.

We may get more clarity, at least on how the bigger companies are performing, when the REITs and providers start to release their specific fourth quarter results in February. The problem is that we are in the middle of the flu season, which while not the worst in recent memory, it is still going to take its toll. How much of the recent gains it may erase is anyone’s guess, but we would not be surprised to see that small 10-basis point fourth quarter sequential occupancy increase for stabilized seniors housing communities be wiped out yet again.