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 SNFs, Assisted Living Lag in Occupancy Since Latest Peak in 2014

New research released by the National Investment Center for Seniors Housing & Care (NIC) said the skilled nursing facility (SNF) and assisted living segments of the seniors housing market have experienced declines in occupancy levels since the most recent market cycle peak seen in the fourth quarter of 2014. The two segments lagged behind independent living but outpaced the memory care sector.

The NIC analysis looked at the changes in occupancy, average annualized asking rent growth, and inventory growth for the independent living, assisted living, memory care, and nursing care segments. 

To understand the definitions used for the study, NIC said seniors housing is defined as majority independent living and assisted living property types, with the latter including memory care but excluding nursing care. “Majority” property types are designated by the segment that comprises the largest share of a property’s inventory mix.

NIC said peak and near-peak occupancy rates were reached in the quarters leading up to the Great Recession a decade ago, and more recently, in the second half of 2014. This latest peak saw occupancy rates at around 90 percent for several quarters. But, starting in 2016 the seniors housing occupancy rate began a 10-quarter decline. NIC said this slide can be blamed on the fact inventory growth outpaced absorption, which fell to 87.9 percent as of the second quarter of 2018, the lowest occupancy rate in seven years.

This latest study looked at the performance of the various market segments since this last peak cycle and found all areas with declines in occupancy from the fourth quarter of 2014 to the second quarter of 2018. "The independent living segment performed the best in terms of occupancy and average annualized asking rent growth. The memory care segment had the weakest comparative performance, overall, with the strongest change in inventory, which put pressure on the segment’s occupancy rates and rent growth," NIC said.

In breaking down the numbers, the report said the assisted living segment experienced higher inventory growth than independent living but lower inventory growth than memory care (11.5 percent). Occupancy declined 3.5 percentage points from 90.2 percent to 86.7 percent, but average annualized asking rent growth for the period (3.1 percent) was roughly the same as in independent living.

For SNFs, NIC said the nursing care segment had the weakest inventory growth (-0.4 percent), a 2.0 percentage point decline in occupancy, and an average annualized asking rent growth rate of 2.7 percent for the period.

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