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For the last few years, senior living operators and their partners have waited for development conditions to turn positive. Now, a new growth wave is forming, but only for certain communities and companies.
Sunrise Senior Living is one such company. According to CEO Jack Callison Jr., the operator and its partners, including its new majority owner, BDT & MSD Partners, are forging ahead with what he called “the largest actionable development pipeline” in senior living today. The pipeline is composed of more than 50 communities in markets that have high barriers to entry, like Tarrytown, New York, and Long Beach, California. It totals more than $7.5 billion in expected costs. With the move, the company is planning to substantially expand beyond its current 230-community count in the U.S. and Canada.
How were Sunrise and its parters able to put together such a large development pipeline as development remains generally hard to do? In a nutshell, it has something to do with the kinds of communities they seek to build. Sunrise is focused on the premium and luxury segment of senior living. The company’s leaders and partners believe that it is serving an increasingly discerning customer base that will expect not just good care, but experiences that engage them and enrich their lives.
“Lifestyle, wellness and hospitality are what we’re going to double-down on,” Callison told me earlier this week. “We think our differentiated approach in operations, premium hospitality, world-class care and bespoke experiences that these seniors want and deserve are really going to be the name of the game for the next decade-plus.”
Looking at recent market data, it’s not hard to see why Sunrise and co. are focusing on the development of luxury properties. A Green Street report from September showed that while backers of communities with average rent profiles are struggling to get those projects started, Class A properties that can command higher rates are penciling out.
The Green Street data shows that yields on new Class A communities in 2026 can be about 8%, translating into a roughly 30% development profit margins, assuming a cap rate near 6%. Meanwhile, more “average” priced communities would have to earn thousands of dollars more in revenue per occupied room (RevPOR) in order to pencil out, the data showed.
Ultimately, I don’t think high-end properties will turn around the industry’s development shortfall alone. Even Sunrise’s big push amounts to only about 7,000 new units, a “drop in the bucket” relative to overall demand, Callison told me. For comparison, absorption — the rate at which senior living units are filled — has averaged 32,000 units over the past four years, which is 50% higher than the previous record total, according to NIC MAP data.
I expect that Sunrise won’t be the only company wielding this growth strategy in the months and years to come given the more favorable financial math involved. The senior living industry is clamoring for growth, and high-end properties offer an important foothold for new development on an otherwise jagged cliff.
In this members-only SHN+ update, I analyze Sunrise’s recent move and new industry data from Green Street and other sources to bring you the following takeaways:
- How and why Sunrise is continuing to push into high-end communities
- Inside the math favoring high-end projects over average senior living communities
- Where all of this is leading and why a more general development wave is still a ways off
Sunrise continues push into luxury
Sunrise Senior Living is no stranger to luxurious senior living communities. Sunrise Senior Living operates two ultra-luxury communities in New York City with rental rates starting at about $15,000 and $17,000, respectively: East 56th and The Apsley, both in Manhattan.
Sunrise staff at the New York City highrises have trained with institutions such as Ritz Carlton to grasp and offer cream-of-the-crop services. Both communities offer a slate of high-end services that include classes from Julliard students or access to Broadway shows.
Luxury is “a feeling,” leaders with operators including Sunrise told me in 2023. At the center of Sunrise and Callison’s philosophy is that not only do older adults of today flock to these kinds of communities, so do their adult children.
“Everybody hears luxury and they think it’s fancy, that it’s champagne or something like that.” Callison said. “But no, it’s listening to your customer and creating these unique experiences that are very meaningful to them. That creates loyalty and it drives our brand.”
Callison said that the company seeks to create communities with “unique and bespoke” experiences that make residents’ adult children actually feel envious that they don’t live there.
“That’s the litmus test for us,” he said. “We still have great care teams, but we’re partnering them with luxury hospitality companies to create these wow experiences that appeal to a younger demographic who are moving in because they want to, not because they have to.”
The company is on pace to do six to seven new developments in the next year, and Callison expects to ramp up to 10 new starts every single year by 2030. In doing all of this, Sunrise aims to elongate penetration rates beyond where they sit nationally at about 11%.
Sunrise is not the only company eyeing top-flight luxury experiences. Operators including Aegis Living, Mather, Galerie Living and Belmont Village have all blazed trails in the product type in the last decade-plus. Leaders of all of these companies have told me in one way or another that they think there is a clear demand runway for luxury-focused communities and will continue to cater to a more affluent customer base.
Class A communities pencil out, average communities don’t
Driving the financial math of these companies’ growth strategies is the fact that high-ed communities carry higher rates and therefore higher and faster returns for investors. Green Street’s most recent report showed that interest in new development of Class A properties is ramping up even while overall development pipelines remain weak.
“Most investors actively underwriting development suggest ~8% NOI yields on an untrended basis, i.e. based on achievable rents today, are realistic for higher-price point [Class A] assets, which translates to profit margins of ~30% at today’s cap rates,” wrote the report’s authors.
According to an example shared by Green Street, an average community with development costs of about $350,000 per unit would carry RevPOR of about $8,300 to achieve NOI margins of 33% at 95% occupancy. A Class A community with development costs of about $575,000 would garner RevPOR of about $9,850 to make an NOI margin of about 40%, assuming 95% occupancy.
“Development economics for average-quality product remains challenged, as rents are still well below levels needed to generate a sufficient return on cost and incentivize investors to take on development risk,” the report’s authors wrote.
This isn’t a new trend, but it is one that is gaining steam. It’s a strategy that companies like Belmont Village have leaned on in the last decade to continue growing anew in high-end markets like San Ramon, California, and in South Florida.
“The combination of terrific experience on how to build a really world-class building with decent economics, and … the rate that we can charge for the value that we deliver enables us to continue safely underwriting new developments. So, we don’t stop,” Belmont Village CEO Patricia Will told me in 2025.
Senior living developers are eager to grow and help solve the industry’s ongoing development shortfall. For companies that can significantly expand their number of new communities in the years ahead, the opportunity is sizable.
The current math of development plus the eagerness to start new projects to meet demand tells me that more companies will grow their own high-end growth strategies, if they aren’t already.
Is this the start of a new industry-wide development wave in earnest? Unfortunately for the industry, maybe not. Although high-end projects are penciling, the Green Street report’s authors noted that difficulties developing average projects means “the ceiling on supply growth is lower than previously expected.” They expect new community starts to pick up in 2027 and noted that “investors are beginning to build out teams and underwrite deals.” Indeed, senior living architects are also busy in 2026 and expect that at least some of their projects will soon advance from design to development in the coming months and years.
Even so, the senior living industry is still waiting for its development fortunes to turn around en masse, even if high-end projects pencil out. While affluent senior living customers are driving the current high-end push, I still think the industry’s biggest opportunity lies in finding new ways to serve the millions of middle-income older adults. And by that measure, the senior living industry still isn’t growing fast enough to meet demand.
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