2025 Senior Housing Market Update

Senior housing occupancy improved for the 15^th consecutive quarter to 87.4 percent in the first quarter of 2025. More importantly, first-quarter absorption increased for three consecutive years, up from 6 percent last year. In fact, this is the highest number of senior housing units absorbed in the first quarter in nearly a decade. This means more seniors than ever are moving into senior housing.

The first quarter marks the 15^th consecutive quarter that absorption has exceeded inventory growth which has led to continued occupancy growth across the sector. Absorption increased by 6 percent, compared to the first quarter of last year and is expected to remain strong, as demand from the 80+ population is expected to expand over the next two decades. In the near term, occupancy will continue to increase as demand is expected to continue to outpace new supply.

---

READ ALSO: Senior Housing Ages Gracefully, but Challenges Persist

---

The pace of new inventory growth decreased in the first quarter to less than 1,900 units, a decline of 32 percent compared to the previous quarter and slightly, 1 percent, compared to the first quarter of last year. Moreover, the number of seniors housing units currently under construction has declined thirteen straight quarters as the first quarter is down 8 percent compared to the previous quarter and down 24 percent compared to last year.

Construction activity in the fourth quarter continues its slow downward trend, currently below 20,000 seniors housing units in primary markets. This is the lowest number of senior housing units under construction since the second quarter of 2013. Historic inventory growth, both short and long term, is required to keep pace with current and anticipated demand.

Rents reach records highs

While seniors housing occupancy is increasing, the reported annual rent change, measured against the previous year, has continued to decelerate over the last seven quarters from its all-time peak high in the second quarter of 2023. The average asking rent for seniors housing in the first quarter exceeded $5,500, the highest average rent in history. This is a 4.0 percent increase compared to the previous year. After nine straight quarters of rate acceleration, we have now seen seven consecutive quarters of deceleration from a 6.1 percent peak in the second quarter of 2023, to 3.9 percent this quarter. While year-over-year rent growth has slowed, it still represents a pace well-above historic norms.

The collective impact of these trends points towards a continued expansion of senior housing market fundamentals.  The combination of historic high demand growth, historically low supply growth, and rent growth slightly outpacing inflation positions senior housing to be one of the most profitable real estate asset classes in the future, according to NIC MAP data in its senior housing market outlook.  

Commentary provided by Arick Morton, NIC MAP CEO

—Posted on April 29, 2025