Senior living companies have long looked to 2026 as an important year for the industry, as it is when the oldest baby boomers turn 80. But the clock to add new supply is ticking, and has been for a while now.
The senior living industry faces a historic demand runway ahead, with millions of older adults set to reach the average age and income for senior living communities. That said, demand alone has not been enough to kickstart new senior living development en masse. Barriers to getting new projects off the ground have included the fact that lenders still are apprehensive about the industry’s near-term as they remain somewhat uncertain on conditions in the year ahead.
Still, many developers believe this is not a time to pause development or wait for conditions to improve. Part of the challenge is that projects in 2024 have a 29-month runway on average from breaking ground to opening – a marked increase over conditions years ago, according to NIC data. Under those timelines, even projects breaking ground today wouldn’t open to new residents until the second quarter of 2027.
By 2030, all boomers will be 65 or older – in other words, the senior living industry’s demand wave is about to crest. The urgency of that window of time is why developers including Oppidan have sought to develop and build anew, even if doing so is very challenging in many markets.
Shannon Rusk, senior vice president of development for Oppidan’s Midwest region, said the organization has been hard at work finding creative ways to get projects in the ground. And she is not waiting around for current challenges to clear, either: “We can’t stop,” Rusk said during a recent panel discussion at the Senior Housing News reBUILD Conference in Chicago.
“I’m not going to be developing in 10 years,” she added. “I’m going to be done in five, and I’m going to reap the benefits and get out. Waiting is not a game that developers play.”
NIC Senior Principal Caroline Clapp (left) and Shannon Rusk, SVP of Development, Oppidan; photo by Merz PhotographyDemand surging, new development not as much
Simply put, senior living demand is surging at the tail-end of 2024, and part of that is simple demographics. About 8,000 people in the U.S. are turning 75 every day, and by 2030 there will be around five million more adults who are age 75 and older, according to NIC statistics. Older adults are also generally living longer in 2024 than their predecessors, and there are more “solo agers” who are widowed or divorced than in the past.
“All of this is driving demand,” said NIC Senior Principal Caroline Clapp during a panel at the reBUILD conference.
Strong demand has helped the senior living industry regain occupancy lost during the Covid-19 pandemic and exceed pre-pandemic averages. According to NIC, average occupancy across the 31 primary markets it tracks reached 86.5% in the third quarter of 2024.
By 2026, that level of demand should push average occupancy up to 91% across the 99 primary and secondary markets that NIC MAP Vision tracks.
Still, that demand is not translating to higher penetration rates – still relatively stalled at around 11% – or higher rates of new construction. In the third quarter of 2024, new senior living construction fell to the lowest level the industry has seen in a decade, according to recent data from the National Investment Center for Seniors Housing & Care (NIC).
But for all its positive demand indicators, the industry still lags far behind where it needs to be with regard to having communities to actually meet that demand. And it is in fact so far behind that Clapp said she is unsure the industry can meet that demand by 2030, even if new building ticks up in the immediate future.
Making matters tougher, NIC data shows that more than half of all senior living communities in the organization’s 31 primary markets are 25 years or older, meaning that at least some will have to be repositioned or replaced to meet modern design and service standards.
The good news is that investors have a relatively strong interest in senior living, given the demand upside ahead. The current challenge is getting them to actually deploy their sums of money, Clapp said.
“The investor demand is quite strong right now,” she said. “Development – I think if we could just get past some uncertainty in the market, it would help. The equity is there, but how do you get the lenders off the sideline?”
Photo by Merz Photography‘If we don’t build, we’re going to have a crisis’
Excelsior, Minnesota-based Oppidan has taken the approach that waiting around for development conditions to change is not a winning play amid today’s challenges. The company delivered a handful of projects in Minnesota and California in the last four years, and worked closely with third-party operators as it did so.
In particular, Oppidan’s dealings in Minneapolis, Minnesota, are a “case study as to why I feel like you have to keep [developing],” Rusk said. Recent licensing changes in the state have meant that Oppidan and its partners have had to change the way they construct communities.
Though those challenges stymied new projects among other companies and in other real estate sectors, Oppidan kept moving forward with its projects in the market.
“Because of that, we hit the market, and we are fully stabilized within eight months,” Rusk said. “Why is that? Not because we’re so good at what we do, but because nobody else came to market.”
To Rusk, now is the time to figure out creative ways to grow with operating and capital partners. Although it may be challenging to do so, she believes that not forging ahead with new development now would be a mistake in a few years when the demand wave is hitting in full force.
“You have got to find those high-barrier-to-entry markets, those incredible sites. Get an operator who’s thinking about 2028, ‘29 and ‘30,” Rusk said. “With the right sponsorship team and the right site, you can be successful in any market.”
And she added now is a time to “be bold and look at the numbers.” Supporting that thesis is the fact that all of Oppidan’s recently opened communities are all “doing great” with regard to lease-up and stabilization.
“How many times have you looked at an investment or a stock and thought, ‘That’s never going to happen’ … and you didn’t invest in it? This is one of those opportunities.” she said. “If you don’t go, you’re going to wish you had in three years.”
Looking ahead, Rusk believes that the conditions are almost right for a new-development boom in senior living, save for the availability of capital for new projects.
“So, you really have to sidle up to your capital partners, and they’re looking for good sponsorship teams. You have to have a solid developer that’s putting their own skin in the game, operators that are putting their skin in the game,” she said. “As long as you get a good story … when they’re ready to go, if you’ve got something that’s ready for them, they’re going to get there.”
