Occupancy Winners and Losers. Seniors housing occupancy rates vary considerably across the nation, with Lancaster, PA, ranking as the strongest occupied market among the NIC 99 in the third quarter at 96.9%, followed by Charleston, SC (at 94.9%), and San Jose, CA (at 94.8%). Four metro areas with the lowest occupancy rates share one thing in common—Texas. These include McAllen, San Antonio, El Paso, and Houston, and all had occupancy rates at or below 85% in the third quarter. The NIC 99 metro average was 90.1% by comparison.
The first Friday of the month at 8:30 EDT is widely anticipated by market participants as the Labor Department presents a fresh gauge of the most recent economic performance in its release of the labor report for the prior month. Today’s number was even more closely watched since it will be the most up to date information on the labor market that the Federal Reserve has prior to its FOMC meetings on December 15th and 16th. At these meetings, the Fed will assess the state of the economy and determine whether or not it should raise its benchmark interest rate which has been near zero since the depths of the recession in late 2008.
Returns Strong. Third-quarter return performance data for the NCREIF-reported seniors housing properties was strong. Total returns equaled 4.20%, composed of a 2.80% capital return and a 1.39% income return. On a one-year basis, total returns were an impressive 16.32%, overshadowing NPI’s strong results (13.48%) as well as those for apartments (12.02%). Income returns for seniors housing are consistently strong, reflecting steady and reliable NOI growth in the sector, while strong capital flows and avid investor interest support capital returns for the sector. On a 10-year basis, total returns for seniors housing exceeded both the NPI and apartments by roughly 550 basis points. These performance measurements reflect the returns of seven managers, who reported $3.2 billion of seniors housing performance data on stabilized properties to NCREIF in the third quarter.
Today’s Labor Department employment report for the month of October was strong and possibly strong enough for the Federal Reserve to raise its benchmark interest rate at its upcoming December meetings. A rate hike had been expected by many analysts for much of 2015, but weakness in the labor markets, among other things, has kept the Fed on the sidelines.