Research suggests that industry researchers’ fears about overbuilding in the senior housing sector could be coming true. Supply is beginning to usurp demand, as new senior housing inventory is currently at its highest level since 2009. Many new developments are in the works, so this situation is not likely to reverse anytime in the near future. According to the National Investment Center for Seniors Housing & Care (NIC), approximately 3,600 new units were developed in the second quarter of 2015 alone. The majority of the new units cater to assisted living.

3,600 new units is a large spike from previous quarters. New senior housing inventory has not exceeded 2,600 units in any one quarter since 2009. NIC Senior Research Analyst Chris McGraw says that there has been much talk about new senior housing development in the last couple of years, but it did not come to fruition until the most recent quarter. “It’s the consequence of development that started a couple years ago in assisted living, and this is the first time we’re seeing that come online.” McGraw says that NIC expects to see similar senior housing inventory figures in the next few quarters, as developments that began in the last couple of years open their doors.

Different markets are absorbing the increase in senior housing better than others, even within a single state. Texas, for example, has seen a dramatic increase in development. Houston has done much better absorbing this new inventory than Dallas or San Antonio. Riverside, California is also struggling with this increase in inventory. Phoenix and Minneapolis are still seeing an increase in occupancy, even with an influx of new developments. NIC reports that occupancy decreased by 0.2 percentage points from the previous quarter across the U.S. in general. Last quarter, the occupancy rate for independent living communities averaged 91%, up 0.5 percent from this time last year. The average occupancy rate for assisted living properties was 88.4%, down 0.3 percent.

NIC’s Chief Economist Beth Mace explained that “demand, as measured by the number of units absorbed, recovered from the first quarter’s low levels, but the slip in occupancy shows that the pace of demand did not match new supply.” NIC reports that the most recent quarter’s 2.1% annual absorption was pretty good, and should remain relatively stable. However, McGraw emphasizes the need to pay close attention to local markets. “That will give you a more relevant indication in benchmarking performance. Real estate is a local business.”

Contact Cambridge Realty Capital

Cambridge Realty Capital has extensive experience and expertise working exclusively in the senior housing and healthcare sector. For any questions regarding the best markets to increase development or any other senior living finance and capital inquiry, contact us today.

Recent Posts

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Start typing and press Enter to search