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Seniors housing fundamentals remained steady during 2019, with occupancy levels showing modest 

improvement compared to the prior year but rent growth easing slightly, based on primary market data from 

the National Investment Center for the Seniors Housing & Care Industry (NIC), a leading provider of seniors 

housing data. 

The level of new units under construction declined modestly during the year, but the supply of new units 

continues to be elevated. The competitive pressure from the new supply likely stifled rent growth during 2019, 

as solid levels of absorption continue to show that demand for seniors housing remains strong. The seniors 

housing industry remains steady overall, with underlying demand from an aging population continuing to 

support absorption and positive rent increases, though the ongoing supply surge may mute out-sized rent 

growth due to increased competition.

Multifamily Economic and Market Commentary

March 2020

Seniors Housing Fundamentals Steady in 2019

Rental Market Fundamentals

Overall occupancy for seniors housing 

improved slightly in 2019, increasing 0.2 

percent from year-end 2018 to 88.0 percent. 

Majority Independent Living (IL) declined a 

modest 0.3 percent from 2018, to 90.0 

percent, while Majority Assisted Living (AL) 

improved a notable 0.6 percent to 85.7 

percent.

Rent growth for seniors housing eased 

during 2019, though performance was 

steady in the second half of the year. Fourth 

quarter 2019 rent growth was 2.8 percent, 

down from 3.1 percent for fourth quarter 

2018. The underlying trends for IL and AL 

were similar during the year: Majority IL 

decreased 0.3 to 3.0 percent, and Majority 

AL decreased 0.4 percent to 2.5 percent.

According to NIC data, total seniors housing 

absorption achieved a record level for the 

year, with approximately 15,600 units 

absorbed, a 9.3 percent increase from 2018. 

The underlying segments experienced 

similar trends: Majority IL absorption was 

18 percent higher than 2018 at 

approximately 6,000 units, while Majority 

AL was up by just 4 percent, to 

approximately 9,700 units.

84%

89%

94%

Occupancy Levels by Property Type – Q4 2019

Seniors Housing Majority IL Majority AL

0%

2%

4%

Year-over-Year Rent Growth by Property Type – Q4 2019

Seniors Housing Majority IL Majority AL

-1,000

1,000

3,000

Quarterly Absorption by Property Type – Q4 2019

Majority IL Majority AL

Source: NIC MAP® Data Service Primary Markets
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Multifamily Economic and Market Commentary

The number of seniors housing units under 

construction decreased in 2019 to 

approximately 42,800 units at year end, which 

is the lowest level since the second quarter 

2017. The total number of units under 

construction is down 4.6 percent from the 

end of 2018. Trends differ for the underlying 

segments: The number of AL units under 

construction is down 11.2 percent compared 

to the prior year, while IL units are up 3.6 

percent. The overall number of units added to 

seniors housing inventory in 2019 decreased 

to approximately 16,750 units, down from 

approximately 21,500 units in 2018. 

0

10,000

20,000

30,000

40,000

50,000

Units Under Construction by Property Type – Q4 2019

Majority IL Majority AL Seniors Housing

Transaction Activity

Total 2019 seniors housing sales volume was up 14 percent from 2018 to $10.6 billion, according to data from Real 

Capital Analytics. The 2019 sales involved 551 properties, down from 737 properties the prior year. Cap rates 

increased to 7.1 percent for fourth quarter 2019, up from 5.6 percent in third quarter 2019 and 6.6 percent a year 

ago. The mix of properties sold in any given quarter can significantly influence national cap rate averages, so it is 

likely too early to determine if this is the beginning of a trend or normal volatility.

Buyer composition for seniors housing properties shifted toward private entities in 2019. Private entities saw 

the largest change in share, accounting for 49 percent in 2019, up from 42 percent in 2018. Institutional 

entities accounted for 26 percent of 2019 buyer volume, up from 20 percent for 2018. Public buyers saw a 

diminished share, accounting for 20 percent of transactions in 2019, compared to 32 percent in 2018.

Source: NIC MAP® Data Service Primary Markets

5%

6%

7%

8%

9%

10%

11%

Cap Rate/Yield – Q4 2019

$0

$1

$2

$3

$4

$5

$6

$7

$8

Billions

Sales Volume – Q4 2019

Source: Real Capital Analytics
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Multifamily Economic and Market Commentary

Primary-Secondary Market Performance

According to NIC data, occupancy levels in secondary markets (32nd to 100th in size) ended the year unchanged 

compared with year-end 2018 at 87.8 percent. Occupancy levels in the secondary markets dipped during the 

middle of the year but recovered by year end. Rent growth in the secondary markets at year-end 2019 eased from 

the prior year, decreasing to 2.6 percent, down from 3.1 percent at the end of 2018.

86%

87%

88%

89%

90%

91%

Occupancy - Primary vs. Secondary – Q4 2019

Primary Markets Secondary Markets

Source: NIC MAP® Data Service

0.0%

1.0%

2.0%

3.0%

4.0%

Rent Growth - Primary vs. Secondary – Q4 2019

Primary Markets Secondary Markets

Metro Level AL Performance

According to data from Reis, Inc., majority AL performance was mixed among the nation’s 50 highest inventory AL 

metros. Among the better-positioned metros, such as suburban Maryland, Minneapolis, and San Diego, there was 

solid rent growth, as well as marked growth improvement. But other metros, such as northern New Jersey, 

Buffalo, and Allentown, saw a significant decline in rent growth rates, with Allentown reporting an outright 

contraction in rent levels. Detroit reported both a significant decline in rent growth and a rising vacancy rate.

From a vacancy perspective, central New Jersey, Buffalo, and Ft. Lauderdale have been experiencing a modest 

tightening for several years. Oakland and San Francisco, while being among the five tightest metros, have seen a 

slow but steady increase in vacancy over the past few years. A similar increase in vacancy has been in occurring in 

Phoenix, Greenville, Detroit, Dallas, and Austin, though the increases in many of the Texas metros are largely 

attributable to surging supply there.

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Select Metro AL Rent Growth – 2015-2019

2015 2016 2017 2018 2019

Source: Reis, Inc. – select metros include 50 highest AL inventory metros

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Select Metro AL Vacancy – 2015-2019

2015 2016 2017 2018 2019
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Multifamily Economic and Market Commentary

Outlook

Seniors housing market conditions were generally steady over the course of 2019, with the continuing trend of 

solid absorption amid generous supply. Rent growth eased during the first half of the year, but overall it remained 

stable considering the ongoing supply surge. Construction activity continued to moderate compared to the prior 

years, though we believe that trend could be short-lived. We expect overall occupancy levels to remain stable over 

the next year. Steady absorption levels should continue, which we expect should allow for moderate ongoing rent 

growth. As long as there is a generally healthy economy coupled with a stable single-family housing market, we 

expect the seniors housing sector to remain fairly steady over the near term. Since many seniors typically sell their 

home to afford the transition into seniors housing, single-family prices can, and do, have an impact on demand. 

Indeed, we expect existing single-family housing prices to increase 4.8 percent in 2020 before easing to 

approximately 2.8 percent in 2021.

Robust levels of new supply are likely an ongoing, long-term characteristic of the seniors housing sector, and 

while there were recent signs of moderation, we believe activity may start to rise again soon. Robust development 

in many markets is likely necessary to prepare for the vast number of baby boomers that will be crossing into their 

80s in the coming decade, which is the peak age for entering seniors housing. Supply growth may prevent 

significant occupancy tightening in the long term, but continued steady absorption and positive rent growth 

appears likely to be sustainable.

Metro-level IL Performance

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

Select Metro IL Rent Growth – 2015-2019

2015 2016 2017 2018 2019

Source: Reis, Inc. – select metros include 50 highest IL inventory metros

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Select Metro IL Vacancy – 2015-2019

2015 2016 2017 2018 2019

Majority IL performance was also mixed among the nation’s 50 highest inventory IL metros, according to data 

from Reis, Inc. Atlanta reported the highest rent growth rate in 2019, with a significant improvement over 2018 

results. Sarasota, the second best in 2019, reported a modest decline from the prior year. The other leaders, 

Seattle, Orlando, and Denver, all had more consistent annual performance compared to 2018. Among the weaker 

metros, Charlotte recorded zero rent growth for 2019, while St. Louis and Baltimore both experienced a rent 

contraction.

Vacancy rates for the tightest Majority IL metros were generally stable in 2019, though Richmond and suburban 

Maryland reported slight improvements. San Jose has continued to have a stable vacancy rate, while suburban 

Virginia and Philadelphia were the other vacancy rate leaders (though they have both seen modest increases in 

vacancy over the past several years). Sarasota is among the five highest vacancy metros, but it has seen relative 

stability compared to the other four high vacancy metros. Those metros, Phoenix, Orlando, Hartford, and 

Houston, have seen steadily increasing vacancy rates. Phoenix is notable as it is the only metro that is in the top 

five highest vacancy metros for both IL and AL.
Multifamily Economic and Market Commentary

Tim Komosa

Economist Manager

Multifamily Economics and Research

March 2020

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Multifamily Economics and Research Group (MRG) 

included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based

on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on 

many factors. Although the MRG bases its opinions, analyses, estimates, forecasts, and other views on information it considers 

reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular 

purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The

analyses, opinions, estimates, forecasts, and other views published by the MRG represent the views of that group as of the date 

indicated and do not necessarily represent the views of Fannie Mae or its management.

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