Asking Rate Growth for Seniors Housing at Near-Record High

​The National Investment Center for Seniors Housing & Care has reported that asking rates are at near-record highs on a year-over-year basis for all three care segments of independent living, assisted living, and memory care, based on contributors to NIC’s data collection.

The independent living care segment was the strongest pace of the three rate categories, at 9.6% year-over-year in March. In-place rates were up by 7.5% from year-earlier levels, and initial or move-in rates were up by 8.2%. These were nearly the highest rates of growth in the time series for these rates, except for January 2022, when many rates rose with lease renewals and annual adjustments.

For assisted living, growth in initial rates was a “very high” 11.5% in February, the largest year-over-year increase in the time series, NIC reported. March gains at 8.7% from year-earlier levels were also “high.” Asking rate growth topped 9.1% in March 2023.

Assisted Living communities are among CRE’s asset classes that​ are​ best able to withstand a downturn, GlobeSt.com reported.

Discounts are highest in the independent living care segment, looking at asking rates and move-in rates (initial rates) within the independent living segment, NIC said.

They have hovered between 1 and 1.3 months on an annualized basis since February 2022 and were the equivalent of $383 (1.2 months) in March 2023. Compared with asking rates, in-place rates had a 0.6-month annualized equivalent discount. This is higher than the historic average of 0.2 per month.

Class A vs Class B

Jay Wagner the Group Leader for Seniors Housing Capital Markets at JLL, noted that NIC’s commentary on discounting is relevant but as an average doesn’t sufficiently distinguish between what we are seeing in the Class A vs Class B product segments.

“Unsurprisingly, we have observed that many Class B communities lack real pricing power and subsequently have had less success pushing effective rate growth when compared to the Class A market segment.

“We continue to observe that the velocity of occupancy rebound experienced by the industry is being led by the higher acuity side of the spectrum which is helping to drive greater stickiness in the recent rent increases.”

Nicholas Hall of Walker & Dunlop’s Seniors Housing team tells GlobeSt.com that he is seeing IL/AL rate increases range from 8% and 12% but has heard of as aggressive as 14%.

Memory Care (MC) is coming in a little lighter, in the 6% to 8% range.

“We attribute this to lower occupancy levels in MC creating a more competitive market,” Hall said. “This is in line with buyer interviews on recent deals we are working on that indicate more aggressive rate growth in IL/AL vs MC.”

Furthermore, the pace of move-ins generally strengthened in the early months of 2023 for assisted living (3.6% of inventory).