Affordability remains a major concern in the senior living property market, as the number of middle-income seniors is expected to double by 2029 and more than half are not expected to have adequate finances to afford conventional senior living and care, according to Cushman & Wakefield’s senior living and care investor survey and report for the first half of 2025.
Supply growth must increase by 35,000 to 45,00 units per year to meet market demand, the company said. However, the highest number of units delivered in a single year was 34,000, and less than 10,000 units were delivered over the trailing 12 months as construction has dipped to a new low.
Senior living property market fundamentals continue to strengthen across the country, as stabilized occupancy trended upward for the 17th consecutive quarter, according to the report. Overall occupancy surpassed 89%, while occupancy in secondary markets reached 90%, a new high since 2017. In addition, net absorption outpaced supply growth by 2.5 to 1, with inventory growth remaining near historic lows, the report said.
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Rent growth averaged 3.9% during the first quarter, which was a slight dip attributable to seasonal trends, according to Cushman & Wakefield. Outsized occupancy and rent growth have helped counterbalance short-term turbulence in the broader capital markets.
The Northeast region remained the strongest performer with stabilized occupancy nearing 91% and annual rent growth nearing 3.5%. The Mid-Atlantic region is also achieving favorable trends in the two categories, although construction levels remain elevated as a percentage of supply.
Active adult communities, an emerging segment and hybrid between multifamily and traditional senior living, continue to gain momentum and have achieved favorable rent growth indicators consistent with conventional senior living, while operating expenses and debt underwriting are more consistent with conventional multifamily. Active adult rental properties reached an average occupancy of 95.6%, with rental growth surpassing 5% during the first quarter, said the report.
Active adult cap rates are similar to conventional multifamily, while stand-alone independent living cap rates are in the low 6% range and senior living communities with independent, assisted and memory care average cap rates in the high 6% range. Assisted living with memory care cap rates average between 7% and 8%. More than half of the participants in the survey said they expect cap rates to remain stable through the remainder of the year and about one-third said they expect cap rates to decrease during the second half.
Senior living transaction volume reached the highest post-pandemic levels in the second half of 2024, marking a year-over-year increase of nearly 70%, as dry powder emerged from the sidelines and debt liquidity cautiously returned to the sector, according to Cushman & Wakefield. An increase in average price per unit highlights a shift back to core investment strategies. Senior living pricing, however, remains below peak levels, with a significant spread from multifamily pricing suggesting valuations should continue to tick upward, said the report.
Top concerns in the market include interest rates, debt market liquidity and labor shortages as the industry looks to expand, according to the survey.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
