It is no secret that demand for senior housing is on the rise as the American population ages. Senior housing companies are trying to develop and expand to meet this demand, but some markets under-performed in the first quarter of this year. According to the National Investment Center for Seniors Housing and Care, those underper-forming markets include Houston, Denver, Las Vegas, and San Francisco. Chris McGraw, senior research analyst at NIC, wrote that “inventory growth was the primary culprit behind occupancy declines in Houston and Denver, while negative absorption was the engine behind declines in Las Vegas and San Francisco,” as the current supply of senior housing is much greater than the demand.
Houston demonstrated a positive rate of absorption, but its senior housing inventory grew by 2.4%, leading to a drop in occupancy to 85.3%. Denver showed a growth rate of 1.8%, a slower rate than Houston, but experienced zero absorption. Denver’s senior housing market is at 89.5% occupancy as of the end of the first quarter of 2015. In both cities, occupancy is declining as inventory is outpacing absorption. San Francisco lost 1.6% of its occupied senior housing units over the course of the first quarter. The occupancy rate in San Francisco declined to 90.5%. Las Vegas also experienced a drop in absorption at 86.6% occupancy. McGraw said that “Vegas’ inventory was relatively unchanged from the prior quarter and San Francisco’s actually declined. It wasn’t supply causing pressure on occupancy; it was absorption.” In March, NIC warned of the potential oversupply in some areas where construction and development for assisted living communities was on the rise, including Houston, San Antonio, Kansas City, and Minneapolis.
As overall senior housing occupancy declined in the first quarter of 2015, independent living has bucked the trend and maintained stable occupancy rates, as reported by NIC. Senior housing occupancy overall decreased 0.2% from the fourth quarter of 2014 to 90.2%. Independent living remained the same at 91.2% occupancy. As a comparison, assisted living occupancy rates dipped from 89.3% in Q4 last year to 88.7%. NIC’s Chief Economist, Beth Burnham Mace, said that it is common for the senior housing market to have lower numbers in the first quarter. “We look forward to seeing the second quarter figures to see the extent to which first quarter numbers were related to seasonal patterns or the effects of the flu season on residents.”
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