By Jenny Wagler
Occupancy rates are rising again for B.C.’s commercial retirement housing sector, signalling a recovery for operators who have been struggling with oversupply and the impacts of the recent recession.
“The occupancies are coming back,” said Vlad Volodarski, CFO of Mississauga, Ontario-based Chartwell REIT (TSX:CSH.UN), which operates 14 seniors’ living facilities in B.C. “So it tells me that this oversupply has been absorbed or is being absorbed by the market.”
Last year, the sector was struggling with a market glutted resulting from five years of rapid development and a customer base hit hard by the recession and a sluggish housing market (see “Market glut dampens retirement development sector” – issue 1056; January 19-25, 2010).
Volodarski said that average occupancy rates in Chartwell’s provincial portfolio have climbed, particularly in 2010’s latter half, to an average of just over 90% from approximately 87% a year ago. But he added that those rates still fall shy of the 96% average the company was achieving in 2007 across its B.C. and Alberta residences.
“We still have a ways to go,” Volodarski said, “but it’s moving in the right direction, albeit slow.”
Samir Manji is president and CEO of Vancouver-headquartered Amica Mature Lifestyles Inc. (TSX:ACC), which operates seven retirement residences in B.C. and 15 in Ontario.
Manji described the sector’s recent turnaround as “a very good recovery.” He noted that occupancy rates at Amica’s Vancouver Island facilities in Victoria and Sydney climbed back to mid-90% levels from 91% a year ago and a “reasonable” recovery in Burnaby. He noted that the Tri-Cities area is still oversupplied.
Manji attributed the turnaround to an aging population and renewed strength in the housing market, which is helping prospective customers sell their homes faster when assembling the funds they need to move into seniors housing.
Azim Jamal, president and CEO of Vancouver-based Retirement Concepts, which operates 16 seniors housing facilities in B.C., also pointed to a recent increase in occupancy rates.
But he cautioned that the recovery is far from over.
Jamal said markets in Nanaimo, Langley, Maple Ridge and Port Coquitlam are all oversupplied.
“There’s very few markets [in B.C.] that I would say are in a stable situation or in an undersupply situation right now.”
Jamal noted that he doesn’t expect the market to fully stabilize for another couple of years.
“I think that people have underestimated the length of time it’s going to take for both the excess supply to be absorbed and for the economic hit that many seniors took to resolve itself and the affordability factor to come back, and for occupancy levels to regain the levels that they were, let’s say back in 2007.”
Jamal noted that while the pace of construction has slowed, there are still some areas, such as Kamloops, where substantive new supply is coming onto the market.
“You’re seeing some situations where developers are saying, ‘Well, I can’t make the economics of my condo project work, so I’ll build a seniors project’.”
Jamal cautioned potential developers against building without first assessing whether a given market can support new seniors housing inventory.
Yet with B.C.’s population of seniors expected to hit one million by 2021, retirement housing sector executives remain optimistic about the sector’s future in the province.
“I think it’s pretty bright,” Volodarski said.
“For the next five years, the demographic growth is not going to be as spectacular as it’s going to be five years after, and then five years after that. But clearly all the indications are of a positive trend in the population growth – of our clientele growth – over the next five years as well.”
Vancouver
CEO: Samir Manji
Employees: N/A
Market cap: $136.7m
P/E ratio: N/A
EPS: ($0.18)
Sources: Stockwatch, tsx globe investor