The third quarter showed some positive movement for seniors housing occupancy, but not positive enough, especially with construction starts.
Well, well, well, what are we to make of the third quarter occupancy and construction stats that came out from NIC last week? The good news was that sequentially, occupancy at stabilized assisted living properties increased by 25 basis points to 90.5%, but was still down 68 basis points from a year ago. That means that the summer uptick that we had been hearing about may not have been as strong as many had thought. One issue we have is that the third quarter sequential occupancy growth for the top 99 MSAs was at the low end for the past seven years, when we would have expected a larger than average third quarter increase.
But it is the new construction that still has us worried. For IL and AL combined, absorption as a percentage of supply has been decreasing for four straight quarters for both the top 31 metro areas and all 99. At the same time, trailing 12-month construction starts to inventory for IL and AL combined has been increasing pretty much since the first quarter of 2014, and has been at or above 3.5% for the past three quarters. But assisted living has been at 5.4% and 5.7% for the past two quarters for all markets, and that is worrisome.
