The senior housing sector is on the brink of reaching record-high occupancy levels, driven by strong underlying market fundamentals that are sparking increased investor interest. Investment firms are increasingly prioritizing senior housing, reflecting a growing confidence in the sector’s near-term and long-term potential.
Bullish Outlook for Senior Housing Investment
Experts from a recent National Investment Center for Seniors Housing & Care (NIC) webinar highlighted the factors contributing to the positive outlook for senior housing investments. The sector is expected to continue improving its operating economics, primarily through steady occupancy growth and rates outpacing expense inflation, leading to enhanced margins.
Key factors fueling this demand include the expanding population of older adults, rising wealth across generations, and a limited supply of new construction. These trends create both short-term and long-term opportunities, with near-term investments benefiting from ongoing occupancy gains and net operating income (NOI) margin improvements, while longer-term prospects are bolstered by the ongoing imbalance between supply and demand.
Occupancy Growth and Market Dynamics
NIC has documented 12 consecutive quarters of occupancy gains across 99 markets, showing a steady return to pre-pandemic occupancy levels. The sector is on track to reach these levels soon, with a particularly rapid recovery in assisted living compared to independent living.
Looking forward, NIC projects that occupancy rates could climb to around 91% by 2026 across primary and secondary markets. This resurgence is supported by a high absorption inventory velocity ratio (AIV) of 23 to 10, meaning that for every 10 new units introduced to the market, 23 units are being absorbed. This clear disparity between supply and demand is driving a surge in occupancy levels and contributing to a robust investment environment.
Recognition and Growing Investor Interest
Earlier this year, senior housing was recognized as a standalone sector in the National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index. This inclusion has raised the profile of senior housing, drawing more attention from external investors who are increasingly recognizing its potential for growth.
One example of this trend is AEW Capital Management, which holds 70 senior housing assets valued at approximately $3.3 billion. The firm remains optimistic about the sector, maintaining senior housing as a top investment priority for 2025, demonstrating strong confidence in its continued growth and profitability.
Future of Senior Housing Investment
With the senior housing sector poised to reach new highs in occupancy, and investor interest steadily growing, the future looks promising. The projected occupancy levels and ongoing absorption of existing units indicate a healthy demand that outweighs supply, further solidifying the sector's appeal.
As senior housing continues to recover and expand, it is clear that the combination of demographic shifts, economic resilience, and strategic investment is setting the stage for sustained success in the years to come. Investors who recognize these dynamics are positioning themselves to benefit from what could be a record-breaking period for senior housing occupancy and profitability.
Krone Weidler, Founder & Principal
Cadre Healthcare Realty Advisors
1095 SE 177th Place, Suite 404-M14
Summerfield, FL 34491
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