According to data that was just released by the National Investment Center for the Seniors Housing and Care Industry, the senior housing sector continued to see occupancy gains during the second quarter of the year. These gains show the continued health of the industry and attractiveness of these assets. Senior housing providers and investors who are anxious to take advantage of the industry’s appeal through growth or acquisitions should contact the Chicago-based financing firm Cambridge Realty Capital to learn more about the manydifferent financing programs that it offers for these and other purposes.
During the second quarter the average occupancy rate for senior housing properties was 89.9%. This represents an increase of 1% from the previous year and .1% from the previous quarter. It is also an increase of 3% from the 86.9% cyclical low that these properties experienced during the first quarter of 2010. In terms of specific housing categories, both independent living communities and assisted living communities enjoyed occupancy gains during the quarter. The occupancy rate for independent living properties increased from 90.2% to 90.5% from the first to second quarter and the occupancy rate for assisted living communities increased from 88.9% to 89% during the same period. In other positive news, the annual absorption rate for seniors housing came in at 2.7% for the second quarter, which is an increase of .4% from the first quarter and .9% from the second quarter of 2013. Lastly, construction growth during the second quarter continued at the same pace that it experienced during the first quarter.
The occupancy gains that the senior housing industry experienced during the second quarter indicate that demand for senior housing services remains strong. It may also have been boosted by recent job growth throughout the country. Nearly 300,000 jobs were created in June and the unemployment rate fell to 6.1%, the lowest it has been since September 2008. As the economy creates more jobs, more people are able to use their newfound income to purchase goods and services that they have been holding off on making, including senior housing services. The continued construction in the space also indicates that the demand for senior housing services remains strong. With roughly 10,000 baby boomers retiring each day, the demand for senior housing communities is expected to remain high for some time. Industry participants have seized on this and are attempting to satisfy this demand by constructing new facilities, renovating older facilities, and converting other types of real estate properties into senior housing facilities. In addition to steady demand for senior housing services, construction in this space is also being driven by the low interest rates that the Fed has been facilitating for the past few years. However, the Fed has begun rolling back the stimulus measures it implemented to lower these rates by gradually winding down its quantitative easing program, and economists also expect it to raise its benchmark federal funds rate sometime next year. Consequently, before this happens the industry might see an increase in construction activity if a significant number of developers rush to build communities before interest rates rise markedly and the cost of borrowing increases with them.
