Investors Bet Big on Senior Housing—But Will Supply Keep Up?

The senior housing market is shifting from oversupply to scarcity as baby boomers hit their 80s, fueling demand while high costs keep new construction slow and affordability uncertain.

Han-Gwon Lung & Jordan B.
February 12, 2025

ADVERTISE // MERCH // PODCAST // EVENTS

Together with

Good morning. The senior housing market is shifting from oversupply to scarcity as baby boomers hit their 80s, fueling demand while high costs keep new construction slow and affordability uncertain.

Today's issue is sponsored by PACE Loan Group—a smart way to finance your commercial real estate project.

🎙️New Episode: Adaptive reuse is reshaping real estate as cities turn underused office spaces into housing—on No Cap, co-hosts Alex Gornik and Jack Stone talk with Victrix Investment’s Anoop Dave and Tim Gordon about the challenges, opportunities, and future of office-to-apartment conversions.

Market Snapshot

S&P 500

GSPC

6,068.50

Pct Chg:
+0.37%

FTSE NAREIT

FNER

786.28

Pct Chg:
+0.41%

10Y Treasury

TNX

4.543%

Pct Chg:
+0.006

SOFR

30-DAY AVERAGE

4.328

Pct Chg:
0.0%

*Data as of 02/11/2024 market close.

ECONOMY & HOUSING

Senior Housing Demand Surges as Boomers Turn 80

After years of oversupply, the senior housing sector is on the verge of a shortage as baby boomers hit their 80s, creating a surge in demand.

The Boomer effect: Senior housing construction stalled during the pandemic and hasn’t bounced back. By 2030, the U.S. needs 560,000+ new units, but only 191,000 are in the pipeline. The result? A looming shortage that could leave many seniors—especially those on fixed incomes—without affordable options.

High costs keep developers on the sidelines: Rising interest rates and construction costs have developers opting for acquisitions over new builds. Giants like Welltower and Ventas are spending billions on existing properties, which are still 20-30% cheaper than in 2019—making buying far more appealing than breaking ground.

Acquisition wins: This strategy is paying off—Welltower and Ventas outperformed the all-equity REIT index by 28 percentage points in 2024. With occupancy back to pre-pandemic levels and rents rising, investors are bullish, but developers remain wary of new builds.

➥ THE TAKEAWAY

Looking ahead: The senior housing sector is shifting from oversupply to scarcity, setting the stage for rising rents and increased investor interest. While demand is growing, affordability remains a challenge, with high-end developments catering to wealthier retirees while lower-income seniors may struggle to find viable options.

TOGETHER WITH PACE LOAN GROUP

Is C-PACE The Solution to Vacant Office Buildings?

With many office buildings vacant or non-performing, property owners are looking for a viable financial and operational solution. C-PACE can be an answer — for conversion to multifamily, recapitalization, or renovation to improve tenant and amenity spaces.

Construction planned or completed in the last three years?

Renovations that lead to conversions or improvements to tenant areas can be financed without recourse for up to 30 years in most states — even for improvements completed in the previous one to three years.

PLG recently provided C-PACE for two office transactions that fit under this umbrella: $15.8M for an office-to-multifamily conversion in St. Paul, MN, and $24M for the renovation of the 444 S. Flower office tower in Los Angeles, CA.

*Disclaimer: This is a paid advertisement. See full disclosure at the bottom of the newsletter.

✍️ Editor’s Picks

It's Your Year to Be the Best Ever: Experience the premier CRE event for passive and active investors at the Best Ever Conference. 25% off with promo code credaily25. (sponsored)
Inflation outlook: The NY Fed's January report shows stable short-term inflation expectations at 3%, but rising concerns about personal finances and future spending cuts.
Proptech hub: Toronto's thriving proptech scene is fueled by local talent, its financial real estate prominence, and the US market, attracting significant investment and innovation.
Trump's tariffs: President Trump reinstates 25% global tariffs on steel and aluminum, with no exceptions, and hints at future duties on cars, chips, and other sectors.
Presidential pardon: President Trump directs the DOJ to drop bribery charges against NYC Mayor Eric Adams, ending a federal legal battle over alleged corruption linked to campaign funds.
$50M bonus: Cantor Fitzgerald CEO Howard Lutnick settles a lawsuit over his $50M bonus, letting him keep the funds while Newmark recovers the amount via insurance.

🏘️ MULTIFAMILY

Distress surges: Multifamily distress rose to 12.9% in January, up from 2.6% YoY, as overall CMBS distress hit 11.5%, with office leading at 17.7%, per CRED iQ.
Affordability push: San Diego passed a law giving city-approved developers the first chance to buy subsidized housing, aiming to preserve affordability amid a surge in multifamily sales.
Greener cities: Oregon-based Green Cities Company acquired the 223-unit Catalyst tower in Chicago for $94M, marking downtown's first major multifamily sale of 2025.

🏭 Industrial

Top markets: Phoenix led 2024 US industrial deliveries with 32.6 MSF, while Savannah-Hilton Head had the largest pipeline, signaling continued growth despite a sector-wide slowdown.
Superior sector: The industrial sector dominated multitenant investment sales in 2024, totaling $70B, while office and retail saw growth, with total annual sales reaching $166.9B.
1 MSF lease: CenterPoint Properties secured a full-building lease with RJW Logistics for a 977 KSF facility in Joliet, IL, within North America’s largest inland port.

🏬 RETAIL

Ze Germans are coming: ALDI plans to open 225 US stores in 2025, mainly by converting 220 Winn-Dixie and Harveys locations, as part of a $9B strategy to reach 3.2K stores by 2028.
Winning leases: Dollar Tree secured 148 Party City leases, while Five Below (FIVE) took 44, as Party City liquidates nearly 700 stores in its bankruptcy auction.
Big buyer: Blackstone's (BX) $4B all-cash acquisition of Retail Opportunity Investments Corp. was approved, securing 93 grocery-anchored properties across major West Coast markets.

🏢 OFFICE

Beating estimates: Strong leasing activity helped Vornado (VNO) post $1.2M in Q4 net income, reversing a $61M loss YoY, as CEO Steven Roth declares the work-from-home “scare” over.
Timber office: Toyota Financial Services signed one of Dallas-Fort Worth’s largest office leases in years, taking a 242 KSF mass-timber building in Frisco, TX.
Investment rebound: Washington, DC saw a 19.8% YoY rise in office sales to $2.6B in 2024, despite rising vacancies and a shrinking development pipeline.

🏨 HOSPITALITY

Beating estimates: Marriott (MAR) reported stronger-than-expected Q4 earnings, adding a record 123K rooms in 2024, though 2025 net room growth guidance fell below analyst expectations.

📈 CHART OF THE DAY

Nareit’s analysis of FRED data shows that while 10-year Treasury yields (4.4%) seem high, they remain mid-range historically.

Public REITs, as measured by the FTSE Nareit All Equity REITs Index, have consistently outperformed private real estate (NFI-ODCE) across all interest rate environments, with the performance gap widening in higher-rate periods.