Q2 2025 — Fundamentals, Sector Performance, and Capital Conditions
This report summarizes the update provided by NIC to partners on September 26, 2025.
Market Fundamentals: Occupancy and Demand Continue to Strengthen
The sector’s positive momentum extended through the second quarter of 2025. Overall senior housing occupancy rose another 0.8 percentage points and now stands above 88% across the primary markets. Record high occupied unit counts underscore the depth of demand: households continue to form and move in, and leasing activity has been consistent across quarters. Importantly, net absorption continues to outpace new deliveries, which has kept the recovery on a steady upward trajectory despite uneven market-by-market variation.
On the supply side, inventory growth remains exceptionally low by historical standards. The combination of muted construction starts and a shrinking development pipeline has supported occupancy gains and tightened market conditions. In practical terms, operators are experiencing fuller buildings and steadier leasing, while investors are seeing improved operating performance translate into firmer asset pricing.
Figure 1. Occupancy continues to climb as absorption outpaces inventory growth (NIC MAP, slide 30).
Regional Performance: Leaders, Laggards, and Improving Markets
Across the 31 primary markets, nearly all are now above 85% occupied. The top tier remained consistent with Q1: Boston, Cincinnati, and Baltimore led the field, all above the 90% threshold, with Tampa close behind. On the other end, Miami, Atlanta, and Las Vegas ranked among the lowest, though Houston posted a notable improvement over the year.
Taken together, the distribution shows a market that has largely stabilized at higher occupancy levels, with pockets of continued catch-up where supply additions or local operating dynamics have kept occupancy comparatively lower.
Figure 2. Senior housing occupancy by metro market—current vs. year ago (NIC MAP, slide 32).
Nursing Care: Recovery Persists, Still Short of Pre‑Pandemic Levels
Nursing care occupancy also improved in the second quarter, although the pace of recovery remains measured and, overall, below pre‑pandemic benchmarks. Demand is present—evidenced by positive absorption—but inventory has been contracting due to closures and conversions.
This supply contraction can support rate integrity, but it also means that growth in occupied beds is occurring from a smaller base. As occupancy builds gradually, operators with strong clinical quality and efficient staffing models are best positioned to translate incremental demand into margin improvement.
Figure 3. Nursing care fundamentals—occupancy, absorption, and inventory trend (NIC MAP, slide 33).
Supply Dynamics: Record‑Low Inventory Growth and Select Market Contraction
Year over year, inventory growth for senior housing fell below 1.0%—the lowest level since NIC began tracking. Development is sparse: nearly six in ten tracked markets had no senior housing projects under construction in Q2. Against the backdrop of firming demand, this scarcity of new supply is a key driver of rising occupancy and rent growth.
At the metro level, several markets have seen net inventory contraction over the last three years because property closures and conversions exceeded new openings. More broadly, 2024 recorded more than 20,000 senior housing and nursing care units removed from inventory, a reversal from the pandemic-era wave but still meaningful. Meanwhile, net absorption has remained relatively stable in a 4–5% annual range while rolling four‑quarter construction starts continue their downward trend—sustaining a wide supply‑demand gap.
Figure 4. Annual inventory growth dips below 1.0% (NIC MAP, slide 35).
Rents, Transactions, and Pricing: IL Leads on Rent Growth; Valuations Firm
Independent Living asking rents grew by more than 4% year over year in Q2, and, notably, IL rent growth has outpaced Assisted Living for multiple consecutive quarters across both primary and secondary markets. The strength in IL rents aligns with the segment’s higher occupancy levels and relatively lower staffing intensity.
On the capital flows side, the first half of 2025 saw more than 800 seniors housing and care properties change hands, with preliminary Q2 figures indicating continued momentum. Pricing has been firming: on a rolling four‑quarter basis, seniors housing averaged roughly $155,000 per unit, while nursing care averaged $93,000 per bed—both higher on a quarter‑over‑quarter and year‑over‑year basis.
Figure 5. IL asking rent growth has moved above AL (NIC MAP, slide 40).
Capital & Economic Conditions: Easing Short‑Term Rates and a Cooling Inflation Backdrop
Macro conditions have shifted incrementally in favor of risk assets. In September 2025, the Federal Reserve cut the target range for the federal funds rate by 25 basis points, acknowledging cooling inflation and a labor market still within healthy ranges. Headline CPI registered a 2.9% year‑over‑year increase in August 2025, while the unemployment rate stood at 4.3%—consistent with a decelerating but resilient economy.
For senior housing, the most immediate effects are on short‑term borrowing costs, floating‑rate debt service, and credit spreads. Long‑term financing costs remain tied to broader rate expectations and the 10‑year Treasury, but the directional easing in policy supports refinancing options and investment activity.
Figure 6. CPI, unemployment, and federal funds rate update (NIC, slide 44).
Debt Maturities & Credit: Managing the 2027 Wall and Low Delinquencies
Loan maturities remain a central theme. The sector has seen widespread use of extensions during the higher‑rate cycle, and 2027 stands out as a notable concentration year for refinancing activity. This ‘wall’ will keep sponsors and lenders focused on business plans, capital expenditure priorities, and operational levers that protect cash flow.
From a credit perspective, senior housing CMBS delinquencies remain below those of many other property types and below the broader multifamily category—an encouraging signal given the macro backdrop.
Figure 7. Senior living loan maturities by original vs. extended term (NIC/Cushman & Wakefield; slide 45).
Investment Performance & Outlook: Durable Returns and Segment Mix
On an unlevered basis, senior housing continues to outperform many commercial property sectors over the long term. Within the NCREIF Property Index, senior housing ranks near the top over longer horizons (e.g., 20 years) and has also posted strong one‑year performance—reflecting resilient operations and the impact of limited new supply.
Within the sector mix, Independent Living has outperformed Assisted Living in recent years. That said, Assisted Living has been making up ground over the past year as occupancy continues to firm and operators refine staffing models and care delivery. The medium‑term setup is favorable: robust demand drivers, constrained supply, and improving capital market conditions together suggest supportive fundamentals heading into 2026.
Figure 8. Senior housing outperforms broader NCREIF benchmarks (NCREIF; NIC, slide 47).
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