Does a tighter spread between occupancy and stabilized occupancy indicate higher demand?

I'm trying to understand how to think about real estate markets and how to identify markets where there might be strong demand for additional housing (I'm looking at senior housing in particular) and am new to real estate, so I had a few questions about metrics.

In particular, two that seem important are occupancy rates (measured as beds filled/available beds in all facilities) and stabilized occupancy rates (measured as beds filled/available beds for facilities that are at least 2 years old.

Obviously, if there's lots of new construction, we'd expect occupancy to fall as a lot of new beds are coming online and it takes time to fill them.

What I'm wondering, however, is if there is significance in comparing the spread between occupancy and stabilized occupancy. For example, if we had a fake and overly simplistic example of two markets that looked like this:

Market 1, Occupancy Rate of 88%, Stabilized Occupancy Rate of 90%, Construction vs. Inventory of 5%
Market 2, Occupancy Rate of 50%, Stabilized Occupancy Rate of 90%, Construction vs. Inventory of 7%


then the conclusion I would draw is there is likely much more latent demand in Market 1 than Market 2 because at at the same new construction levels, the spread is so much lower in Market 1 (2%) than Market 2 (40%), indicating that properties are filling up much faster in Market 1.

Is that the right way to think about this metric? If so, how should I think about adjusting or scaling this kind of metric for the amount of new construction?

• Could you explain what "Construction vs. Inventory" means? and why do you assume "same new construction levels"? That assumption seems inconsistent with the discrepancy in Construction vs. Inventory. – Iñaki Viggers Nov 1 '18 at 14:08