Senior Living Industry Faces Improving Investment Outlook In 2025

Senior living demand is high, supply is low, large lenders like Fannie Mae are more active and operational expenses are stabilizing – all conditions pointing toward a better year for investment activity in 2025.

That positive sentiment was on display earlier this year at the NIC Spring Conference in San Diego, where about 89% of 1,900 surveyed attendees reported a positive or extremely positive outlook for the year ahead. That number is up from about 80% in 2024, according to Lisa McCracken, head of research and analytics for NIC.

That said, there are still some forces threatening to derail the industry’s progress this year, at least in a minor way, she said. Almost half of all senior housing communities in the U.S. are 25 years or older, indicating a need for fresher senior housing for a new generation. The lack of scalable affordable senior living communities is also a barrier for a more cash-strapped incoming generation of older adults.

“We need to make sure that we’re aligned and bringing on to the market what they want,” McCracken said during a NIC webinar Wednesday.

Aaron Becker, senior managing director and head of seniors housing and healthcare production at Lument, said his firm discussed many “real, actionable deals” with potential partners at the recent NIC Spring Conference. Senior living operators are by and large seeing better operating fundamentals this year, such as higher margins, better revenue and more stable expenses, he added.

That has lured more family offices and potentially other “shrewd institutional investors” into the space, he said.

“I think more private equity, more funds are going to come into the space as well. I think there’s a great opportunity there,” Becker said during the webinar. “I do think there’s gonna be a lot more capital coming into the market, which will help get some of these projects from the drawing board [and] into the ground.”

The U.S. Federal Reserve cut interest rates by 50 basis points in September, which had an immediate impact on bridge financing, according to Becker. The Fed also has indicated it may cut rates by another 50 basis points this year.

“Most of the bridge financing is a variable rate product, and that’s what’s primarily used for acquisition financing,” he said. “So, 100 basis points starts making a difference in terms of what you can afford to finance.”

Stability on the “longer end of the yield curve” in the form of the 10-year treasury and a realization of a “new normal” regarding financing is also pushing some companies to act sooner rather than later.

“I think there’s also a realization from our clients out there that we’re not going back to the ultra low pandemic induced interest rates,” Becker said. “It doesn’t make sense to sit and wait for rates to go much lower, and I think that’s all been a factor in terms of the positivity and more activity we’re seeing in the market.”

Distress in 2024 drove some dealmaking, and Becker said the industry is in 2025 “more toward the end than the beginning” of that cycle.

“What’s happened is a lot of lenders went through extensions, were really working with borrowers. They did not want to go through the foreclosure process. I think it was a combination of extending – and in some cases, operators were able to turn things around in that time period,” he said.

These conditions have lured lenders including Fannie Mae back into the lending market for senior living. Although the lender never truly “left,” Becker noted it was “much more particular on the opportunities they were looking at.” Now, the company is “much more aggressive in their bid” – a good sign coupled with peer lender Freddie Mac’s “wonderful year” in 2024.

“When both Fannie and Freddie are competing, it brings a lot more liquidity and allows us to be more creative with our clients,” he said.

Last year was a “bad year” for senior living dealmaking, with many “onesie-twosie” deals, Becker said. This year, he said he’s seen multiple large portfolios potentially waiting to change hands.

“I think those will be announced in the coming months, which is exciting to see,” he said.

Looking ahead, Becker anticipates seeing more “musical chairs” among lenders, with loans moving from lender to lender “hoping that is the last stop.” The bottom line is that the industry sees demand ahead, and he believes investors will act to take advantage of the opportunity.

“This is really a wonderful time as owner, operators, whatever, developers, wherever you are in the industry,” he said. “The demand is here. It’s coming.”

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