Senior Living Demand Rebounds as Supply Constraints Reshape the Market
The United States is entering a period of accelerated senior housing demand growth as the 80-and-over population expands sharply. Absorption is rising, occupancy has returned to prepandemic levels, and operators are seeing more tours of facilities and leasing activity.
This surge in demand is colliding with a construction slowdown, thin development pipelines and persistent labor shortages. In turn, that imbalance is creating pressure on existing inventory, but also strategic opportunities for investors, developers and operators who can navigate higher costs, staffing constraints and tighter financing conditions.
In the next phase, organizations that can expand capacity, modernize operating models and secure capital to address long‑term demand will be best positioned to capture growth, strengthen margins and drive durable asset performance.
Occupancy rises as demographic growth increases pressure on existing inventory
Absorption and occupancy have recovered to prepandemic performance levels. This recovery reflects increasing move-ins, fewer move-outs, and demand that remains resilient despite economic variability. The sustained demographic influx of older adults is directly contributing to rising occupancy rates across markets.
Senior housing occupancy gains are continuing in 2026, with NIC reporting occupancy has rebounded more than 900 basis points from pandemic lows, with senior housing operating portfolios approaching pre-2020 performance across major operators.
Health care real estate investment trusts (REITs) with significant exposure to senior living are benefiting most from these occupancy trends, highlighting the urgency for increased development activity.
Kristian Spannhake, the director of project development at Harkins Builders, sees potential in senior-centric communities designed from the ground up to support seniors’ independence, safety, health and social connection while preserving dignity and quality of life.
Rather than a one‑size‑fits‑all building, these environments anticipate age‑related mobility, sensory and lifestyle changes and embed solutions directly into the design.
Investment in senior housing construction slows inventory growth
Despite increasing demand, development activity has slowed. Cushman & Wakefield notes that units under construction declined to approximately 2.3% of existing inventory in 2025—the lowest level since 2012—underscoring the widening gap between demand and new supply.
Senior housing investment trends also point to shifting dynamics in property pricing and acquisition activity. Limited transaction volume created a disconnect between reported capitalization rates and underlying return expectations, according to MSCI Real Capital Analytics and Bloomberg Intelligence. This resulted in spreads between cap rates and U.S. Treasury yields that remained well below the peaks of 2020 through 2022.
As pricing clarity has improved, 71% of the more than 75 senior living and care professionals surveyed by Cushman & Wakefield now expect cap rates to compress through 2026, up from 33% at the start of 2025.
Reported cap rates have stayed relatively stable despite meaningful changes in operating cash flow and interest rate movements. Health care REITs, specifically, are active buyers in this environment. These acquisitions often occur at values below replacement cost, reinforcing investor confidence in the long-term fundamentals of the sector.
Although REITs represented the bulk of 2025 transaction activity, renewed market confidence is supporting a return of institutional investors. In parallel, global commercial real estate fundraising totaled $164.4 billion in 2025, with $115 billion targeting North America, according to Cushman & Wakefield, as capital allocations increasingly favor alternative real estate asset classes.
Workforce shortages, meanwhile, continue to challenge operators across senior living. Cushman & Wakefield’s investor survey identified labor availability as the single greatest risk to senior living valuations in 2026, cited by 37% of respondents.
Overall, elevated construction costs, interest rate pressures, regulatory requirements and staffing limitations have extended development timelines and reduced feasibility. As a result, the senior living sector faces a growing investment gap that must be addressed to prevent future shortages.
“Despite these challenges, developers and contractors have adapted effectively through collaboration, thoughtful unit mix and building adjustments—exploring interpretations and alterations to building codes and other innovative strategies suited to the evolving construction landscape,” Ryan Cooke, Harkins Builders’ senior living division operations manager, told us.
Tax planning considerations for senior living providers
As development pipelines lag demand, tax-efficient capital planning can boost project feasibility. For example, accelerated depreciation through cost segregation can improve early-year cash flow, while energy-efficient building incentives may help offset higher construction and labor costs.
Owners and operators can also strengthen long-term performance by evaluating federal and state credits tied to health care services, workforce development and facility improvements—tools that may narrow funding gaps.
Positioning for growth in a tightening senior housing market
Construction firms, investors and operators that invest in people, data and technology will be better positioned to manage costs, accelerate development timelines and secure the financing necessary to bridge the senior housing investment gap.
Demand will continue to outpace supply unless development activity expands meaningfully. Addressing the investment gap will be essential to meet the housing needs of an aging population and ensure long-term stability across the senior living sector.
Amy Baker, Real Estate Industry Senior Analyst; Senior Manager, RSM US
Amy Baker is an industry senior analyst in RSM US LLP’s audit practice, where she specializes in companies within the commercial real estate sector, with an emphasis on senior living clients. In 2026, Amy was selected for RSM’s cutting-edge Industry Eminence Program, which positions its analysts to understand, forecast and communicate economic, business and technology trends shaping the industries the firm serves.
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Nicole Lechter, Real Estate; Senior Manager, RSM US
Nicole Lechter is an assurance senior manager and a real estate senior analyst based out of RSM Canada’s Toronto office. She provides assurance and advisory services to public and private real estate companies. As a member of RSM’s Industry Eminence Program, Nicole works alongside the firm’s chief economist and her fellow senior analysts to understand, forecast and communicate economic, business and technology trends affecting middle market businesses.
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