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 New Data Show SNF Occupancy Higher in Fourth Quarter Versus Previous Quarter

Skilled nursing facility (SNF) occupancy bumped 0.3 percentage point higher to 86.3 percent in the fourth quarter of 2018 when compared to the third quarter of 2018, while occupancy for assisted living communities held steady in the fourth quarter at 85.4 percent, according to the latest quarterly data from the National Investment Center for Seniors Housing & Care (NIC).

Overall, NIC said the occupancy rate for seniors housing across the country was mostly unchanged in the fourth quarter of 2018, with average occupancy of 88.0 percent, up 0.1 percentage point from the prior quarter and down 0.7 percentage point from a year ago. 

Current occupancy is 2.2 percentage points below its most recent high of 90.2 percent in the fourth quarter of 2014.

“Not only was the fourth quarter’s increase in occupied seniors housing units the highest recorded since NIC began reporting the data back in 2006,” said Chuck Harry, NIC’s chief of research and analytics. “The fourth quarter was the first quarter of the past three years during which the growth in occupied units managed to keep pace with the number of new units that came on line.” 

This means the fourth quarter of 2018 was the first period since the fourth quarter of 2015 during which the increased demand from consumers kept pace with growth in the inventory of new units. “New demand and new supply during the quarter were on par with each other,” he said.

Occupancy rates for independent living and assisted living properties averaged 90.2 percent and 85.4 percent, respectively, during the fourth quarter of 2018. That number put independent living occupancy up 0.1 percentage point from the prior quarter and down 0.5 percentage point from a year ago for the same quarter. 

The occupancy rate for assisted living was unchanged from the third quarter, but down 0.9 percentage point from a year ago.

The SNF occupancy increase to 86.3 percent in the fourth quarter of 2018 came as the nursing care annual inventory growth rate was down 0.4 percentage point in the fourth quarter of 2018, while annual absorption was also down by the same 0.4 percentage point. Private-pay rents for the sector grew 2.6 percent year-over-year in the fourth quarter of 2018, steady from year-earlier levels in the fourth quarter of 2017.

NIC said during the fourth quarter of 2018, the average rate of seniors housing’s annual asking rent growth was 3.0 percent, up 0.1 percentage point from the prior quarter and down from a recent high of 3.8 percent in the fourth quarter of 2016. For comparison, labor expense growth as measured by the annual change in assisted living average hourly earnings was 4.3 percent in the third quarter, according to the Bureau of Labor Statistics.

“Year-over-year quarterly hourly earnings growth for assisted living has exceeded 4 percent since early 2017, more than in many other sectors,” said Beth Burnham Mace, chief economist for NIC. “Because labor expenses account for roughly 60 percent of an operator’s expenses, this ongoing wage growth is putting pressure on operators’ ability to grow net of operating income, especially in markets where revenue growth is being impaired by weak occupancy and slower rent growth.”
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