If it seems you’re noticing more senior housing communities these days, you’ve got a good eye for development. Retirement communities, along with the older Americans primed to move into them, have increased in number over the past decade.
As commonplace as these communities appear to be, however, the pace at which they’re being developed has fallen off noticeably in recent years. The number of new starts is not keeping up with those coming online. At the same time, the number of seniors looking to move into senior housing has not dropped, and is likely to surge next year, when the very first wave of baby boomers, born in 1946, start entering their 80s.
The supply-demand imbalance is troubling, but also spells opportunity for those investing in the industry. These are among the findings of a recent report from National Investment Center Market Analytics Platform (NIC MAP) Vision, which provides market analytics technology and comprehensive market data for the senior housing industry.
Imbalance created
In 2022, two years after Covid dealt a body blow to the sector, the demand for senior communities began outstripping the supply, a reversal of a near-decade long excess of supply over demand that had existed from 2013 to 2021. That demand-over-supply imbalance has grown in the years since, NIC MAP Vision reports. The report finds the absorption rate in the first quarter of last year soared by 40% vis-à-vis the previous year, while occupancy and employment inched to within 1-2% of pre-Covid levels.
As 2025 begins, the senior housing industry finds itself with opportunities as well as a number of headwinds. On one hand, there exists clear and growing demand from older Americans for senior housing. The development of senior housing is generally viewed as a good thing for the nation. What’s more, not only do many older adults want to live in senior communities, the median net worth and income of seniors have grown substantially in the past decade. That’s left greater numbers better able to fund the cost and more likely to view expense as less of an impediment to a move to senior housing.
Nursing shortages
These pros notwithstanding, an array of hurdles faces the industry. None is greater than the staffing shortfall that exists now and is likely to grow larger over the decade.
The sector is expected to face shortages of millions of workers by the 2030s, as well as concerns that wage growth will make it difficult for the industry to keep housing costs reasonable. “The senior living sector has continued to cope with nursing shortages and staff retention issues, which are most pronounced within the skilled nursing facilities and continuing care retirement communities,” says Hoa Nguyen, senior reporter for credit intelligence and data provider Octus. “Operating costs remain a key pressure in the sector since Covid-related assistance has been winding down [starting in]
late 2023.”
Another issue is the potential delays in seniors moving into retirement communities, due to dynamics of the current American housing market. “The story of the senior living sector is as much about healthcare as it is about the real estate market,” Hguyen says. “This means if the housing market is stagnant, it takes people longer to sell their properties, which in turn puts pressure on facilities that heavily rely on new people moving in and putting down large deposits from the start.”
The result has been financial struggles and a number of well-publicized Chapter 11 filings in the senior housing sector over the last five to six years.
Despite the challenges, NIC MAP Vision strikes an upbeat chord as it concludes its report. The authors write: “Investors and lenders have the opportunity to capitalize on this growing market, as historic highs in absorption rates demonstrates strong consumer demand for senior housing communities.”
Added Octus: “There is still value in investing in the sector, as staffing and occupancy pressures ease and primary supply bounces back to quench high-yield investors’ thirst.”
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