Positive Growth, Strong Fundamentals, and Optimistic Investor Sentiment
Overview
The 2025 Senior Housing Credit and Investment Outlook webinar, hosted by the National Investment Center for Seniors Housing & Care (NIC), highlighted a sector with improving performance and sustained demand. Key speakers included Lisa McCracken, Caroline Clapp, and Bill Kauffman from NIC, along with Jim Costello, Chief Economist for Real Assets at MSCI.
Their collective insight painted a clear picture: the senior housing market is entering a period of renewed strength, supported by demographic demand, low new supply, and favorable investment conditions.
Market Fundamentals
The U.S. senior housing industry now includes approximately 2.1 million investment-grade units, spanning independent living, assisted living, and memory care. The active adult housing segment is also growing quickly.
Key demand drivers include:
- The rising 80+ population over the next two decades.
- Increasing home equity and household wealth among baby boomers.
- Shifts in lifestyle and family structures, such as solo aging and fewer available caregivers.
These trends are driving record net absorption rates and pushing occupancy to all-time highs across both primary and secondary markets.
Supply Conditions
New supply remains historically low.
- Annual inventory growth is below 1% for the second consecutive quarter.
- Nearly 60% of markets report no active senior housing construction.
- Development cycles have stretched to an average of 29 months due to higher costs and limited capital access.
The result is a favorable supply-demand balance, which supports continued rent growth and occupancy gains. However, the average property age is 24 years, emphasizing the need for modernization and reinvestment.
Active adult communities are performing exceptionally well, maintaining 95% stabilized occupancy and monthly rents between $1,500 and $2,000.
Operations and Credit Trends
Operating fundamentals are improving:
- Net Operating Income (NOI) margins are expanding.
- Expense growth has stabilized.
- Rent growth remains above the 10-year average.
Labor costs continue to represent about 40% of total revenues, but wage inflation has eased.
Loan performance has also strengthened:
- Senior housing loan delinquencies dropped from 2.41% in 2024 to 1.22% in 2025.
- Agency lending and credit availability have improved.
- Refinancing risk remains low despite upcoming loan maturities through 2027.
Investment Performance
Senior housing continues to outperform most commercial property sectors.
- Total returns: +4% in the first half of 2025.
- Independent living slightly outperformed assisted living due to higher margins and lower staffing costs.
- Cap rates remain 150–200 basis points above multifamily, signaling both stability and opportunity.
NIC’s investor sentiment survey showed that 92% of respondents hold a positive or extremely positive outlook for the sector—the highest level since 2024.
Broader Economic Context and Outlook
According to Jim Costello (MSCI), senior housing benefits from predictable demographic-driven demand, which makes it less volatile than sectors like office or industrial real estate.
However, short-term risks include:
- Labor market changes and inflation.
- Evolving consumer preferences among baby boomers.
- Global trade and tariff uncertainties.
Despite these challenges, the long-term outlook remains strong.
With limited new construction, rising occupancy, and robust capital interest, senior housing is positioned as a top-performing real estate asset class through 2026 and beyond.
Key Takeaways
- Demand: Driven by demographics, wealth growth, and social trends.
- Supply: Historically constrained, supporting strong occupancy.
- Operations: Improving NOI and stabilizing expenses.
- Credit: Low delinquencies and increasing loan activity.
- Investment: Competitive returns and high investor confidence.
Senior housing’s combination of demographic certainty, operational recovery, and capital market stability makes it one of the most resilient and promising sectors in today’s real estate market.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.