CHARLOTTE, NC-An expanding U.S. economy will restore several facets of seniors housing demand, while another year of subdued construction tempers supply concerns. That combination sets the stage for a modest recovery during 2011. So says Marcus & Millichap’s SeniorsHousing Research Report for the first half of 2011.

“The seniors housing sector has improved significantly since last year, as demand begins to pick up from aging baby boomers,” Mike Pardoll, a senior vice president of Investments at Marcus & Millichap in Charlotte, tells GlobeSt.com. “The resumption of job creation has begun to restore healthcare benefits for Americans, for instance, enabling the re-employed to move ahead with procedures requiring rehabilitative services in skilled nursing facilities.”

Here are some metrics: During 2011, occupancy in the Independent Living sector will improve 80 basis points to 88.1%, supporting a 1.1% increase in rents to $2,678 per month. Assisted Living operations will hold relatively steady, M&M predicts, but a modest rise in completions will lower the occupancy rate 40 basis points to 88% this year. As operators compete for residents, rent growth will ease to just 0.8% to $3,543 per month.

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This year, M&M reports renewed job growth will increase rehab facility visits, resulting in a 50 basis point increase in SN occupancy to 88.9%. Average daily revenues will advance 3.2% to $274 per occupied bed per day. And decelerating stock additions and moderating home price reductions, which are likely to increase the number of seniors able to sell their homes, will contribute to a slight 40 basis point improvement to 89.5%.

“Already, the sector shows signs of being in the initial phase of a durable recovery,” Pardoll says. “The resumption of job creation has begun to restore healthcare benefits for Americans, for instance, enabling the re-employed to move ahead with procedures requiring rehabilitative services in skilled nursing facilities. Seniors housing property groups closely tied with the housing market, meanwhile, such as independent living facilities and CCRCs also have begun to stabilize, despite headwinds in the residential sector.”

As M&M sees it, although home prices continue to fall, the rate of decline has moderated drastically, making sales decisions palatable for seniors to transition into retirement communities. Nonetheless, the firm predicts a full upturn in seniors housing remains a few quarters out, and the speed of a revival will hinge on regulatory actions and an upturn in the housing market. With the pace of supply growth to remain muted, the sector will trend toward recovery, supporting across the board rent growth.

“With healthcare-oriented real estate operations stabilizing, and growing share of baby boomers on the brink of retirement, cash-rich REITs are back in the marketplace and driving seniors housing sales activity,” Pardoll says. “Healthcare REITs, whose stock prices have been rising, accounted for more than 90% of the sector’s buyer composition early this year, bidding up prices for class A facilities. As such, direct cap rates for desirable properties have dipped from year-ago levels.”

The dominance of REIT transactions stems from large portfolio buyouts, not the purchase of single properties. Still, Pardoll says, investor demand for single modernized facilities will remain high, and with this year’s building pipeline to remain light, quality assets brought to market will receive multiple offers.

“These trends could squeeze private-equity buyers out of the top-tier arena,” Pardoll says. “But overall closings should gain steam in 2011 as more investors, betting on a strong recovery, buy discounted properties ahead of further operational improvements.”