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Celebrating the NIC Dismal Occupancy Rates

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By Steve Moran

This past week National Investment Center for Seniors Housing (NIC) published their Q2 2017 data and the occupancy rates for assisted living are dismal. You can see their press release HERE.  

I AM CELEBRATING!

Some of you are not liking me very much for celebrating, because it sounds like I love bad things happening to the industry, and I don’t. But bad/changing circumstances bring about changes in a way that good news never will. I will come back to this, but here are the high points (or low points) from the NIC report:

  • The occupancy rate for seniors housing properties in the second quarter of 2017 averaged 88.8%, as net additions to inventory outpaced absorption of units -- a decrease of 0.5 percentage points from the prior quarter and a decrease of 0.9 percentage points from a year-earlier.

  • This is just 1.9 percentage points above the cyclical low of 86.9% during the first quarter of 2010.

  • The occupancy rates for independent living properties and assisted living properties averaged 90.6% and 86.5%.

  • The occupancy rate for assisted living was down 0.7 percentage points from the first quarter and 1.4 percentage points from year-earlier levels.

  • Occupancy for assisted living was equal to its low point reached in the data series in second quarter 2009.

  • Seniors housing annual absorption was 3.0% as of the first quarter of 2017, up 0.2 percentage points from the first quarter of 2017, up 0.6 percentage points from one year earlier, and its fastest pace since NIC began reporting the data in 2006.

  • The seniors housing annual inventory growth rate in the second quarter of 2017 was 3.9%, up 0.5 percentage points from the prior quarter and also its fastest pace since NIC began reporting the data in 2006.

The bottom line is that even though absorption rates are relatively strong, they are not strong enough to keep up with the amount of new inventory.

Why Celebrate?

For me the bottom line is that today we are leaving many residents behind. What I mean by this is that because of the way we market our communities . . . the way we tell our stories, we end up discouraging folks from moving into our communities. It is not that they choose a different community, they just plain don’t do anything. This means they mostly stay home (or stay home longer), move in with a relative or go to a nursing home. This is not good for the industry and it is not good for seniors.

And yet . . . there are hundreds of communities and dozens of senior living and assisted living organizations that are consistently operating with occupancy levels in the mid to high 90 percent range. They are not making this happen because they are discounting their rates or because they are at the very high end of luxury care.

They are doing this because they have created a culture that does two things:

  1. They care for their team members who then care for their residents in amazing ways.

  2. They have a whole community culture that is focused on selling their community to every person who walks through the front door. They do this because even if that person walking in the front door is not a direct prospect, they know someone who knows someone who is in need of senior living.

There are enough prospective residents to go around. Right now there is a sense that 90% or 86% is acceptable. But it shouldn’t be, it doesn’t need to be. 

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