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**Senior Housing Sector Forged Ahead in 2025**
The senior housing sector experienced a significant upswing in 2025, driven by increasing occupancy and a constrained development pipeline that led to a shortfall in inventory. According to Cushman & Wakefield, net absorption outpaced new supply, as the number of units under construction fell to its lowest level since 2012.
Cushman & Wakefield’s recently released U.S. Senior Living & Care Investor Survey and Trends Report revealed that valuations in the senior living sector rebounded in 2025. Cap rates declined by 24 to 50 basis points, reflecting stronger demand—particularly for large, well-located properties and portfolios.
Key trends outlined in the report include:
**Rising Operating Margins**
Operating performance improved across the sector, thanks to platform consolidation, wider adoption of technology, and easing pressures in the labor market. However, the availability of specialized labor continues to be a top concern.
**Increased Transaction Volume**
By the fourth quarter of 2025, transaction volumes rose 30% year over year. Real Estate Investment Trusts (REITs) remained dominant players in the space, while institutional capital began to return. At the same time, a growing number of lenders re-entered the market.
**Loan Maturity and Distress**
Loan maturity concerns eased, with distressed loans accounting for just 1.85% of total volume by year-end. While distressed assets are limited, the report noted that resolution activity remains elevated, particularly for aging assets that have exhausted options such as loan extensions and forbearance.
**Bifurcated Investor Interest**
Investor strategies continue to diverge between core-plus and value-add assets. While some are targeting distressed properties, the supply of those assets remains limited. A decrease in negative leverage has helped bring asset pricing back toward equilibrium.
**ESG Considerations**
Environmental, social, and governance (ESG) factors are gaining attention among investors, not necessarily for their direct impact on valuations, but as added benefits during decision-making.
Looking ahead to 2026, analysts and survey respondents expressed cautious optimism. While the labor market and interest rate environment remain key concerns, overall investor confidence in senior housing has strengthened.
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