After a sharp turnaround in 2025, senior living cap rates appear headed even lower this year—a sign of strengthening valuations and renewed investor confidence across the U.S. senior housing market, according to Cushman & Wakefield's Senior Living and Care Investor Survey and Trends Report.
About 71% of the 75 industry leaders surveyed said they expect cap rates to keep decreasing through 2026, more than double the 33% who held that view a year earlier. Only 16% foresee no change and 13% expect an increase, suggesting most investors believe valuations have bottomed. Cushman & Wakefield noted that, unlike other property types, senior living cap rates have tended to move in line with interest rates, leaving additional room for compression.
Valuations have already rebounded, rising 10% year-over-year as cap rates compressed by 25 to 50 basis points in 2025. Stabilized occupancy reached 90% by the end of last year—the highest since 2017 and the culmination of 20 consecutive quarters of growth. Annual rent growth averaged 4.7%, down from the 2023 peak of 6.1% but still well above inflation.
Transaction activity surged alongside valuations. Fourth-quarter 2025 investment volume jumped 50% from the prior quarter and 30% year-over-year. REITs continued to drive most deal flow, although institutional investors are beginning to reenter as market fundamentals improve. Globally, commercial real estate fundraising totaled $164.4 billion in 2025, with roughly $115 billion allocated to North America.
Cushman & Wakefield's analysts described the shift as decisive: "The return of capital coupled with an increase in debt liquidity helped drive a very competitive investment market for the sector, signaling a swift shift from a buyer's market to a seller's market."
Still, investors remain cautious about several lingering risks. Labor shortages topped the list of valuation concerns at 37%, followed by current interest rate levels (29%), debt market liquidity (17%), regulatory changes (11%) and increased supply (6%). Encouragingly, distress levels eased, with problem loans falling to just 1.85% of total volume by year-end 2025.
As for strategy, 50% of respondents favored a core‑plus approach, followed by value‑add (28%), core (11%) and opportunistic or distressed plays (11%). Nearly three-quarters said they were unwilling to underwrite negative leverage and most of those open to it limited exposure to less than a year.
When asked where new investment opportunities will emerge in 2026, respondents pointed most often to majority assisted living (44%), followed by active adult (28%) and majority independent living (13%), with smaller shares for LPC/CCRC communities, nursing care and memory care.
With occupancy climbing, valuations firming and more capital returning to the market, Cushman & Wakefield suggests the senior living sector may be entering its most balanced investment environment in years.
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