When Demand Growth Outpaces Supply – Oct. 6, 2025
Seniors housing occupancy is likely to continue growing faster than construction of new product
At the start of 2025, this column cited a newly issued report from the National Investment Center for Seniors Housing & Care (NIC) that pointed to a growing gap between supply and demand. It’s now the fourth quarter of the year, and while NIC’s latest report highlights the sector’s long-term growth prospects, it’s also clear that the shortfall of supply hasn’t improved over the course of the past year.
The occupancy rate for seniors housing overall stood at 88.7% as Q3 ended, up seven percentage points from Q2 and up 15 percentage points from the end of 2024, according to data from the NIC MAP platform. Occupancies have now increased for 17 consecutive quarters, with assisted living properties seeing the biggest increase (nine percentage points) during Q3.
NIC MAP data show that occupancies at nursing care properties didn’t change compared to Q2, holding steady at 86.3%. However, this segment was also the only one to record negative annual inventory growth, as well as the lowest ratio by far of construction versus inventory. Partly as a result, nursing care has also posted the fastest annual rent growth: 5.2%, compared to 4.3% for seniors properties overall.
Between active adult, independent living, assisted living and nursing care properties, the seniors housing category can serve a wide range of preferences and needs. The Baby Boom cohort (people born between 1946 and 1964) comprises 20% of the U.S. population, implying steady growth in occupancies over the next several years.
“Baby Boomers are reshaping the industry by demanding greater choice, whether that relates to lifestyle, services offered or price point,” said Lisa McCracken, NIC’s head of research and analytics. “The sustained strength across all community types reflects diverse needs. We anticipate strong consumer demand will drive average seniors housing occupancy rates above 90% by the end of 2026.” Long-term, the oldest members of Generation X turned 60 this year, suggesting that this cohort will also help sustain occupancy growth at a similar pace.
Whether that demand growth is met by a concomitant supply increase is another matter. NIC MAP showed 0.7% annual inventory growth overall as of Q3, while annual absorption stood at 3.5%. In other words, the properties are filling up faster than they can be built.
NIC cited economic and market pressures, such as the cost of capital, materials and labor, as continued obstacles to supply-side growth. Fewer than 1,400 new units were opened in Q3, and inventory growth fell lower than in previous quarters, according to NIC. Rolling four-quarter starts as a percentage of inventory ranged from 1.2% for independent living to zero for nursing facilities.
Analysts with NIC say the combination of high demand and limited construction is driving occupancy as available senior housing communities fill up. It’s also worth noting that seniors operators generally face higher operating expenses (and therefore lower operating margins) than their counterparts in conventional multifamily, which presents an ongoing stumbling block to supply growth.
“While we’re beginning to see some movement in the markets, ongoing construction headwinds could lead to a shortage of senior living options in certain areas over the medium term,” said Arick Morton, CEO of NIC MAP. “That’s why it’s important for older adults and their families to start planning now—having conversations early about how and where they want to age ensures they’re prepared when the time comes.”