Hints of an upturn in senior housing communities were seen at the end of last year but largely disappeared during the first quarter of 2010, according to authoritative occupancy, pricing, and inventory information provided every three months by the non-profit National Investment Center for the Seniors Housing & Care Industry (NIC).
Occupancy rates for independent living and assisted living complexes fell slightly to 88 percent in the 31 large metropolitan areas tracked by NIC. Monthly rents were higher but the rate of increase also softened from earlier periods. "The average monthly rent (AMR) per unit for independent living was $2,701 during 1Q10, which is up 1.5 percent on a year-over- year basis," NIC reported. "For assisted living, the AMR was $3,528 in [the first quarter of 2010], up 1.4 percent on a year-over-year basis."
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The story in skilled nursing facilities was slightly different, as occupancy rates edged up to an average of 89 percent during the first three months of the year. Average monthly rates were $7.928, up 3.3 percent from a year ago.
Occupancy rates in the mid-90s were common in many facilities in 2006 and 2007 until housing and finance markets went into deep declines. And very few large investments have been made in senior housing complexes in recent years. However, NIC said the relative stability of rental rates demonstrates the validity of senior housing as an asset class that can be appealing to investors.
Eventually, the slow recovery of the nation's housing market will also mean a thaw for senior housing communities. This is very much a local story that depends on the recovery of home sales. In markets where seniors can sell their homes at a decent price, they will once again be able to afford entrance fees at retirement communities.
NIC also tracks the construction of new units, and has recorded a sustained decline in new construction for the past three years. Right now, even lackluster increases in the supply of senior-community living units is more than the sector can absorb on a sustained basis. But as NIC vice president Michael Hargrave notes, an increase in consumer demand can happen in a matter of months. New senior housing units, however, normally take years to receive funding and be built. Attractive communities in healthier markets will be the canaries of any upturn, he says, and will exhibit higher occupancy rates and longer waiting lists for new entrants.
[See The New Reality of Senior Communities.]
Here is a detailed look at the status of rental-rate units in continuing care retirement communities (CCRCs). About 60 percent of nearly 226,000 CCRCs units measured by NIC are in communities that charge entrance fees; the other 40 percent charge monthly rental fees. Operators of rental-rate communities say they've been less affected than entrance-fee communities by the housing slowdown. That's because entrance-fee CCRCs are more reliant for new entrants on people who fund the purchase price by selling their primary residences.
This table includes 29 of the 31 NIC markets; two markets did not report complete data for the first quarter. For each market, the table lists: (1) the occupancy rate of the market during the first quarter of 2010; (2) the percentage point increase or decline in occupancy rates from the first quarter of 2009; (3) average monthly rates for the first quarter of 2010; (4) the dollar increase or decrease in average monthly rents from the first quarter of 2009, and, (5) the inventory of rental-rate CCRC units in each market.
| Market | (1) | (2) | (3) | (4) | (5) |
| Atlanta, GA | 88.6% | 0.9% | $2,781 | $6 | 1,570 |
| Baltimore, MD | 96.2% | -0.4% | $3,416 | $-168 | 1,301 |
| Boston, MA | 92.5% | -0.9% | $3,043 | $48 | 1,300 |
| Chicago, IL | 88.6% | 0.3% | $2,968 | $22 | 5,950 |
| Cincinnati, OH | 87.6% | -1.7% | $2,606 | $-2 | 5,124 |
| Cleveland, OH | 91.4% | 4.0% | $2,327 | $-59 | 4,635 |
| Dallas, TX | 83.9% | -4.1% | $3,004 | $400 | 3,085 |
| Denver, CO | 91.7% | -0.6% | $2,941 | $104 | 2,346 |
| Detroit, MI | 90.5% | -1.6% | $2,745 | $36 | 1,915 |
| Houston, TX | 86.3% | -3.2% | $2,884 | $59 | 2,549 |
| Kansas City, MO | 78.3% | -0.8% | $1,614 | $12 | 2,787 |
| Los Angeles, CA | 90.0% | -2.8% | $2,331 | $-60 | 6,043 |
| Miami, FL | 89.0% | -1.7% | $3,097 | $11 | 4,056 |
| Minneapolis, MN | 96.1% | 2.1% | $1,643 | $83 | 6,149 |
| New York, NY | 95.4% | 1.1% | $2,790 | $183 | 5,858 |
| Orlando, FL | 76.1% | 8.1% | $2,287 | $873 | 1,204 |
| Philadelphia, PA | 87.2% | -3.4% | $2,751 | $124 | 7,156 |
| Phoenix, AZ | 89.2% | -2.7% | $2,008 | $-83 | 4,744 |
| Pittsburgh, PA | 93.4% | -1.5% | $1,889 | $-335 | 1,884 |
| Portland, OR | 90.8% | -1.4% | $2,011 | $88 | 2,147 |
| Riverside, CA | 88.9% | -4.0% | $2,053 | $272 | 747 |
| Sacramento, CA | 92.2% | -5.5% | $2,972 | $1005 | 591 |
| San Antonio, TX | 93.0% | -1.0% | $3,002 | $339 | 2,187 |
| San Diego, CA | 88.6% | -1.4% | $3,354 | $33 | 2,595 |
| San Francisco, CA | 92.9% | -2.5% | $3,655 | $460 | 1,187 |
| San Jose, CA | 100.0% | 3.2% | $2,900 | $ 0 | 657 |
| St. Louis, MO | 90.8% | 0.4% | $2,780 | $-11 | 3,635 |
| Tampa, FL | 87.1% | 1.6% | $2,530 | $134 | 3,792 |
| Washington, DC | 91.4% | -0.5% | $2,963 | $-132 | 3,072 |
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