Buying vs. Building – Oct. 26, 2026
Lack of new supply is making development a lower-cost route in seniors housing
“Our highest conviction area over the past three years has been in seniors housing. It’s the area where we have deployed over a billion dollars of equity across our strategies. That has been an area that we think has very strong long-term demand trends.”
That’s Chris Lee, partner and president of KKR Real Estate, on a recent Walker Webcast. Sentiments such as these go a long way toward explaining the 74% increase in transaction volume over the trailing four quarters recorded by NIC MAP and cited in Walker & Dunlop’s latest Seniors Housing Outlook. Put simply, institutions have gotten back into the game.
“Seniors housing has become an increasingly attractive investment opportunity as institutional capital returns to the sector,” said Kevin Giusti, senior managing director of Capital Markets Real Estate Finance at Walker & Dunlop. “With occupancy climbing and new construction at historic lows, competition for quality assets is intensifying. We are seeing stronger buyer demand translate into compelling opportunities for owners looking to capitalize on today’s market.”
According to the National Investment Center for Seniors Housing & Care (NIC), national occupancy reached 90.4% in the third quarter, with San Francisco (94.0%) and Boston (93.3%) recording the highest occupancies among the 16 primary geographic markets tracked by NIC. Conversely, construction activity fell by 1.0% in Q3 and inventory growth remains near record lows. In a market like Boston, that means operators implementing waitlists to ensure fair access.
NIC MAP notes that growth in the 80-plus population overtook seniors housing inventory growth in 2022. By 2030, seniors population growth is expected to approach 7% annually versus 1% growth in new supply. NIC MAP projects that the industry will need to deliver more than 100,000 new units annually in most years between 2025 and 2035 to maintain current occupancy levels.
“For several quarters, we’ve seen a widening gap between what Baby Boomers will need and what the industry is producing,” said Lisa McCracken, NIC’s head of research and analytics. “We’re hearing anecdotally that planning activity for new development is picking up, but until we see the trend reflected in the data, there will continue to be increasing pressure—and opportunity—to meet demand.”
One factor gradually tipping the buy-versus-build balance in favor of building is the cost of buying. NIC reports that seniors housing operators say acquisition pricing on new properties is beginning to surpass replacement costs. Which makes sense: if demand exceeds supply, supply is priced accordingly.
Still, Walker & Dunlop reports that “a broad construction wave comparable with 2017 and 2018 appears unlikely in the near term.” The company sees two distinct areas for development activity: “high-end private-pay seniors housing in urban and other desirable markets where rents can support a higher development basis, and middle- to upper-middle-market projects in secondary and tertiary markets, where sponsors may be able to manage costs through more efficient design, finishes, and amenity packages.”
That leaves some pretty wide gaps in supply. Moreover, NIC MAP CEO Arick Morton observed that ground-up development won’t cover the shortfall by itself. He suggested adaptive reuse and expansion of existing properties as creative solutions. If adaptive reuse can cover some of the demand for apartments, it ought to be able to perform a similar function for seniors housing.