This article is part of your SHN+ subscription
The senior living industry is much more optimistic in 2025 about the demand at its doorstep in the form of the baby boomers – but there is still a lingering disconnect between recognizing that demand and actually meeting it.
That was among my big takeaways a week after attending the annual NIC Spring Conference, this year in San Diego. Although the senior living industry has done well to emerge from the Covid-19 years, it now faces its next challenge: Growing for the future.
To that end, there are few immediate solutions as development remains prohibitively tough to pencil out due to the high cost of debt financing and construction and a general lack of access to capital.
“We need to develop about twice as many units as we’ve ever developed, every single year in aggregate for the next 20 years, to basically keep up,” NIC MAP CEO Arick Morton said during a panel discussion.
I find that pace to be staggering, and I am unsure the industry can meet it as developers and their operating partners wait for conditions to improve before kicking off bigger growth plans. That isn’t to say there aren’t companies trying to seize the moment by growing via development. But those companies’ plans are ultimately drops in a much larger bucket.
On the flip side, capital providers and investors are sitting on piles of cash that they seek to deploy. While the state of new construction remains relatively frozen, M&A is thawing with big recent acquisitions from companies like Welltower (NYSE: WELL) and CareTrust REIT (NYSE: CTRE).
I don’t think a quick rebound is possible for new development to take place given capital market constraints, which is why I think that operators and their partners need to get more comfortable with growth despite current risks, or they could miss the leading edge of the industry’s baby boomer age wave.
In my conversations with operators including Sagora Senior Living, Heritage Communities and Milestone Retirement Communities, I heard common themes of pivoting away from new development to seek growth by acquisitions or rethinking entirely what development might look like in the future for senior living operators.
In this week’s members-only SHN+ Update, I cover recent comments made during the NIC conference and offer the following takeaways:
- How operators are balancing the need to grow with a lack of new development
- Debt markets must ‘lead the way’ for development to improve
- Potential for 2026 to start the development boom
New development frozen but sorely needed
This year is not shaping up to be the “year the shovels come out,” and with each passing year the industry’s “investment gap”grows.
As Morton has noted before, the senior living industry faces a $275 billion investment shortage in development by 2030. At the current pace of new development, the industry will fall short of demand by about 550,000 units in the next five years.
Development must accelerate more than 3.5 times the current pace to meet demand, NIC MAP data shows. This comes as only 26,000 units were developed in 2024, with the industry on track to have added only half the required inventory needed by this year as construction rates remain the lowest since 2009. Additionally, almost half of all senior living communities in 2023 were 25 years or older, reflecting the fact that not all current communities will be sufficiently positioned for the future.
“The key takeaway here is if you look at what came before and what comes after, you can see just the staggering growth of what is coming as well as where we are,” Morton said during the conference.
As new construction remains hard, small and large operators I spoke with at the conference said they are relatively cool on development.
Take fast-growing operator Sagora Senior Living, which is now at 81 communities with plans for future third-party management acquisitions. The Dallas, Texas-based provider has over the years pivoted from a growth strategy centered on development to one of working with larger partners to manage communities, CEO and President Bryan McCaleb told me during the conference.
“We had a development company that we closed during 2020 and we have been growing without development,” McCaleb told me. He also believes there’s “going to have to be development at some point” across the industry.
This lack of new development also has smaller operators thinking about affordability and widening services to more older adults.
Pacific Northwest and Midwestern senior living operator Milestone Retirement Communities is reshaping some of its existing communities to meet middle market price points, and future development will depend on financing conditions improving, according to CEO Caryl Ridgeway.
“As an industry, we’re going to have to do things differently and that starts from acquisition and development,” Ridgeway told me. “That means changing the model of what we’re developing [and] the size of what we’re developing.”
Ridgeway believes the industry must look at developments differently with smaller footprints and unit sizes to meet middle market demand at a cost basis that can work for new projects.
Other operators, including Heritage Communities, told me that they’ve pivoted to third-party management, something that took CEO Farhan Khan and President Nate Underwood multiple years to pull off.
“We’ve planned for this over the last few years and we brought on the staff we need for this growth,” Khan told me. “We are going to be very measured in how much we take on.”
It’s no surprise that M&A is helping to achieve growth for some operators while development remains tough. For instance, Foundry Commercial is merging operators Spring Arbor and Allegro to form a new management company called Allegro Living, which is set to operate 53 senior living communities across 13 states.
According to Foundry CFO Kevin Maddron, the company’s big strategy is to bring together complementary senior living footprints and then grow from that platform via new acquisitions, and hopefully in the near future, development.
“We now have access to different geographies. We can serve our capital partners better that way,” Maddron told SHN. “It’s really being able to access new markets and new opportunities we wouldn’t have had otherwise.”
Based on my conversations with these and other operators, I believe the senior living industry is more optimistic about the road ahead than at any point since 2020. And yet, I believe that the current reality of new development and growth is tempering that optimism somewhat.
As others have pointed out before, the current period somewhat resembles the aftermath of the Great Financial Recession, when growth was hard but rewarding when done right. Like then, I think the challenge now is for operators to grow while others can’t and build competitive advantages in the form of new operational sophistication.
That is partly the strategy of Naperville, Illinois-based Charter Senior Living. The company is building in markets that “sometimes people can’t even find on the map,” CEO Keven Bennema said during a panel discussion.
It all comes back to debt – or the lack thereof
Creativity and finding untapped markets alone won’t fuel future development at the scale needed to keep up with demand, due to lending remaining a big barrier to senior living development and growth. For those with cash to deploy, acquisitions remain better bets, at least for now.
AEW Acquisitions Director Jennifer Wong noted during a panel that it could take “12 to 18 months” for new development projects to emerge if existing conditions persist.
“It will just take time, and we need the debt markets to lead the charge,” Wong said.
Confluent Senior Living Managing Director Matt Derrick warned that the industry could reach a “crisis point” in the coming years if operators and capital providers aren’t able to get on the same page with new development.
“There’s going to be an inflection point and I think development is going to have to be part of the solution,” Derrick said during a panel. “If we do not meet the demand, our industry is going to suffer.”
Still, I see little that would change current conditions. As Welltower CEO Shankh Mitra has noted, why would a senior living developer spend a dollar building something only to sell it at a later date to a REIT like this for 70 cents on the dollar?
I don’t think anyone in the industry has a good answer to that question today. Instead of deploying dollars for big development projects, companies like Welltower are spending billions to acquire high-performing portfolios like the Amica Senior Lifestyles platform in Canada.
To me, there are greater current opportunities for senior living operators to try and work with the companies making those kinds of deals and grow alongside them. The challenge is that that won’t actually expand the stock of senior living communities for a new generation.
Still, developers say the winds are changing, albeit slowly. While 2025 might not be the industry’s big development year, a growth spurt in 2026 is still on the table.
“We’re seeing more interest in development in the last six months than we have over the last two years,” Derrick said. “We are now full steam ahead on design and pre-development really gearing our portfolio for ground breaking later in 2025 and into 2026.”
