Why Senior Housing’s Ready to Grow Again
Bryan Lockard of JLL on the strong fundamentals driving this trend.
The senior housing sector has demonstrated remarkable resilience and is poised for growth in 2025. Despite facing challenges from the pandemic and recent economic volatility, the sector has rebounded strongly, with key indicators pointing toward a positive outlook for investors and operators alike.
Transaction volume in the senior housing and nursing care space remained stable at $57.6 billion at year-end 2024, matching the previous year’s activity. While portfolio transactions saw a slight decrease due to lower debt market liquidity, there were still significant deals, including the $725 million recapitalization of Chicago Pacific Founders’ 20-asset portfolio.
Occupancy rates have shown consistent improvement since the pandemic’s low point. In primary markets, occupancy has grown by 80 basis points to 88.2 percent in Q4 2024, while secondary markets have seen a 95-basis-point increase to 89.7 percent. This upward trend is driven by strong absorption rates and below-average inventory growth, creating a favorable supply-demand dynamic for existing properties.
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The demographic tailwinds supporting the senior housing sector remain robust. The U.S. population age 80 and above is projected to grow by 35.5 percent over the next decade—from 14 million to 19 million. This significant increase in the target demographic underscores the long-term demand potential for senior housing and care facilities.
Rent growth in the sector has outpaced pre-pandemic levels and even exceeded recent trends in the multi-housing rental sector. As of Q4 2024, senior housing rents averaged $5,207 across primary and secondary markets, representing a 22.5 percent increase from pre-COVID levels.
Construction starts have slowed significantly, mirroring trends seen across other commercial real estate sectors. In primary markets, starts are down 68 percent from recent peak levels, while secondary markets have seen a 69 percent decrease. This slowdown in new supply is expected to further support the performance of existing properties.
Capitalization rates have expanded by approximately 150 basis points since their low of 5.0 percent in Q2 2021. However, spreads between senior housing cap rates and the 10-year U.S. Treasury have compressed to 194 basis points, below the long-term average of 442 basis points. This compression indicates strong investor interest in the sector despite the challenging interest rate environment.
Strong sentiment for seniors
JLL recently released its eighth annual Seniors Housing Investor Survey and Trends Outlook, which gathered insights from some of the top industry professionals and also reveals a generally optimistic outlook for 2025. Key findings include:
- Cap rate expectations: An overwhelming 97 percent of respondents expect cap rates to either decrease or remain stable in the coming year, reflecting increased certainty around the Federal Reserve’s future path and the belief that peak interest rates have been reached.
- Investment preferences: Assisted living facilities have emerged as the most targeted investment opportunity, followed by independent living and skilled nursing. This ranking indicates where investors see the greatest potential for returns in the coming year.
- Sector exposure: The vast majority of investors surveyed are looking to increase their exposure to the senior housing sector in 2025, with only 2 percent planning to decrease their involvement. This strong interest underscores the sector’s appeal as an alternative investment with favorable long-term demographics.
- Marketing time: Eighty percent of respondents indicated that the typical marketing time for senior housing assets has decreased to just six months, suggesting increased transaction velocity and investor confidence in the market.
- Concerns: The primary concern cited by investors (45 percent of respondents) relates to capital markets and interest rates, followed by the availability of workforce (14 percent). These concerns highlight the ongoing impact of broader economic conditions on the sector.
Despite these challenges, the senior housing sector’s fundamentals remain strong. The combination of rising occupancy rates, robust rent growth and slowing new construction creates a favorable environment for existing properties. Additionally, the sector’s recession-resistant nature and the unstoppable demographic wave of aging Baby Boomers provide a solid foundation for long-term growth.
As we look ahead to 2025, the senior housing sector appears well-positioned to capitalize on these trends. Investors who can navigate the current capital markets landscape and focus on high-quality assets in strong markets stand to benefit from the sector’s growth potential. In the next decade, the demand for senior housing is expected to remain strong, potentially leading to further rent growth and value appreciation.
Bryan Lockard is executive managing director, JLL Value and Risk Advisory.
