Senior Living ‘Knocking On’ Record-High Occupancy Levels in Coming Years, Propelling Investor Interest

The underlying fundamentals of senior housing are contributing to an increasingly bullish outlook for investment in the sector.

In fact, occupancy could reach record-high levels in the coming years, while investment firms such as AEW are prioritizing senior housing above other types of real estate in their near-term strategies.

That’s according to experts who spoke on a recent National Investment Center for Seniors Housing & Care (NIC) webinar outlining factors playing out in the industry today.

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“Our short-term investment outlook is stable to positive. So we expect to continue to see improving operating economics driven by occupancy growth and rates exceeding expense inflation, resulting in increasing underlying margins,” said NIC Head of Analytics Lisa McCracken.

Favorable demand drivers include the growing demographic of older adults, rising wealth across various generations of older adults, and lack of new construction.

Short-term opportunity for senior housing investment is being driven by continued occupancy and net operating income (NOI) margin gains, while medium and longer-term investment remains attractive due to imbalanced supply and demand.

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That imbalance could fuel a surge in occupancy, which already has been steadily climbing.

NIC has tracked 12 straight quarters of occupancy gains in the 99 markets it follows, with occupancy nearly returning to pre-pandemic levels. McCracken sees the industry hitting its pre-pandemic occupancy figure in the near term, driven by record levels of absorption of existing units.

“It’s just important to note we are seeing the recovery in assisted living occupancy happen at a much more rapid pace than the recovery of independent living occupancy,” McCracken said.

Looking ahead to 2026, NIC is projecting a 91% occupancy rate across the 99 primary and secondary markets it monitors by the end of the year.

“We may be knocking on some of the record highs over the next few years, and we’re able to do this because we know the construction cycle and length of that being elongated,” McCracken added.

That projection is coupled with an absorption inventory velocity ratio (AIV) of 23 to 10. What that means is that for every 10 new units entering a market, 23 units will be absorbed—showcasing the clear gap between supply and demand fundamentals for senior housing.

Earlier this year, senior housing was included as a standalone sector in its National Council of Real Estate Investment Fiduciaries (NCREIF) Property Index, the most widely used private real estate investment benchmark in the U.S. This raises the profile and awareness of outside investors to the prospect of future investment in the sector, according to NIC Senior Principal Caroline Clapp.

The investment outlook for senior housing could net new investment in the sector. Take AEW Capital Management, for example; the firm has 70 senior housing assets valued at approximately $3.3 billion. AEW Capital Management Managing Director Brian Sunday said the firm remains “bullish” on the sector, with senior housing being the firm’s top investment category for 2025.

“We’re starting to see a lot more capital formation happening in the background. Our investors, our LPs, they’re starting to get more interest in reinvesting back in the space after what’s been a really difficult four years,” Sunday said during the webinar.

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