Occupancy rates of senior housing are on track to reach levels not seen since 2008, according to a report from NIC. It is also outperforming other types of commercial real estate properties. That hasn’t happened for nearly 20 years.
There are two reasons: demand and supply. The demand side is broad-based for both needs-based and lifestyle-choice property types. By the end of 2026, NIC’s projections show most markets passing the peak levels of Q1 2008. Primary markets were at 87.4% occupancy in Q1 2025 and are 270 basis points from the 2008 peak. Secondary markets are at 89.1% with 130 basis points to peak. The primary and secondary markets are together at 88% occupancy, 220 basis points below the old peak.
By geographic areas, the occupancy rate and basis points below the 2008 peak are 88%/160 for East North Central; 88.7%/290 in Mid-Atlantic; 88.1%/100 for Mountain; 90%/220 in Northeast; 87.4%/380 in Pacific; 86.9%/220 in Southeast; 87%/160 in Southwest; and 87%/450 in West North Central.
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Meanwhile, East North Central, Mountain, Northeast, Southeast, Southwest, and West North Central are all predicted to achieve levels beyond what was seen in 2008.
Out of apartment, mall, office, industrial, strip retail, and senior housing, the latter had the fifth- or sixth-highest occupancy levels for most of the last 20 years. That changed in 2023 and 2024, when senior housing took the top occupancy positions.
The increase in occupancy and higher interest rates, combined with tighter capital availability, has attracted institutional and private investor interest. In an October Urban Land Institute survey, senior housing was second only to data centers in projected risk-adjusted returns over the next three years.
But while investor interest is on the rise, so are some difficulties for investors. Labor availability remains tight, especially with the current administration’s tariff and immigration policies. Also, operators face limited pipelines of frontline and clinical staff.
New construction is more expensive than the replacement cost of existing buildings. That’s making transaction volumes and per-unit pricing more expensive. There are new approaches to greater construction efficiency. Developers are looking at “modular construction, off-site fabrication, and smarter design strategies” to create more cost-effective new buildings.
Eventually, that will help, but for now, it means new buildings aren’t cost-competitive with existing properties. Completion can also take several years. It all limits the available space, combining with demand to push occupancy higher and supporting rents.
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