Investor Optimism, Available Debt Could Spur More Senior Living Transactions In 2025 

Investors of senior living properties are hitting the reset button on their strategies to deploy capital in 2025, and they are optimistic about what they can achieve ahead.

But the industry still has several hurdles left to clear, including affordability for residents, labor shortages and inflationary costs, interest rates and a lingering wave of debt maturities.

That’s according to the Cushman & Wakefield Senior Living and Care H1 2025 report, released this week. The latest survey includes responses from more than 75 industry investors.

“Increased transaction activity is expected during the second half of 2025. Debt is becoming more available as lenders more programmatically open their balance sheets and debt becomes less expensive, albeit still selective,” the report’s authors wrote. “These improvements in the debt markets may also help move the mountain of dry powder, $382 billion globally, off the sidelines, signaling the cusp of the next growth cycle as the strong performance of the senior living sector continues to capture the attention of investors.”

Investors who responded to the latest report said they expect more occupancy gains stemming from high demand. Net absorption of senior living units has improved since the second quarter of 2021 and has surged to an “all-time high” in primary and secondary markets, the report states.

Active adult demand continues to rise, as the product type climbed to 95.6% occupancy and rent growth of 5% in the first half of this year, the report noted. Active adult communities continue to have operating expenses and underwriting comparable to multifamily, according to Cushman & Wakefield.

To reap the full potential of “peak demand” in senior living, supply growth must increase by 35,000 to 40,000 units per year from current construction rates, according to the report. But this doesn’t appear a reality as development continues to remain muted across the sector stemming from the current level of construction costs and other factors, according to the report.

Capitalization rates are “widely stratified” across asset class and investment quality, with 53% of the surveyed investors noting that cap rates have peaked and will remain flat through the rest of 2025. Cap rate spreads remain elevated compared to the 10-year treasury bond yield, potentially suggesting undervaluations or additional risk but could bring near-term upside on pricing. By property type, cap rates in independent living were on average 6.2% in the first half of 2025, while assisted living average cap rates were 6.8% and 8.5% in memory care, according to the report.

Transaction volume rose by nearly 70% year-over-year in the second half of 2024 as the price per unit rose 46% in early 2025 compared to the year prior, according to the survey.

Construction starts, or lack thereof, have fallen to levels not seen since the 2008 Great Financial Crisis, with approximately 10,000 new units added in the past 12 months.

“This reduction in projected supply growth, coupled with the increase in consumer demand, will be critical in the sector’s ability to offset the increased operating expenses caused by labor shortages and rising insurance premiums plaguing the sector,” the report states.

Since the start of 2025, distressed asset transactions accounted for nearly 2.8% of reported sales, falling below expectations which signals a shift “back to core and core-plus” investment strategies as 31% in the first half of this year are changing tack with core acquisitions and 43% with core-plus and 13% respectively for distressed and value-add acquisitions compared to 2024, the investor survey shows.

The greatest risks to valuations over the next 12 months are current interest rates (39%), labor shortages (33%) along with increased supply and changing regulations at 11%, respectively, while debt market liquidity (4%) and “other/pandemics” accounted for 2% of risk, the report shows. The top three conditions in the 1H25 were the same as last year, it should be noted.

In the first half of this year, 41% of investors who responded to the survey said they’re seeking majority assisted living properties compared to 29% in 2024. Majority independent living came in second for greatest segment for investment opportunity at 16% in the first half of 2025 compared to 14% last year. Active adult was the third-most favorable investment type at 15% this year and 13% in the first half of 2024, the report shows.

With $18 billion in senior living loans to mature in the next 24 months, lenders are working with current partners rather than seeking foreclosures, the report said.

The industry’s affordability issue remains “broadly unsolved,” but “new design trends are emerging,” the report notes. This comes as demand for middle market senior living is projected to increase as the number of mid-income older adults is expected to double by 2029.

“Over half of this segment will not have adequate finances to afford conventional senior living and care,” the report said.

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