Senior Housing Sector Poised for Strong Rental Growth in 2025 Amid Strengthening Fundamentals: CBRE Survey

The senior housing sector is poised for significant rental rate increases in 2025, driven by strengthening fundamentals that partly offset a challenging lending environment, according to a new CBRE survey.

More than 56% of investors anticipate rental rate increases of at least 3% in the next 12 months across senior housing segments. This growth is attributed to rising occupancy rates and limited new development activity due to higher interest rates, labor and material costs. Independent Living should see the most substantial uptick, as 65% of investors expect rent to rise by between 3% to 7% over the next year. Notably, no segment of the senior housing sector is expected to see a rental decrease.

“Senior housing remains an attractive asset class for many investors, driven by upward trajectory of rental rates resulting from increasing demand and limited future supply,” said Daniel Lincoln, leader of Senior Housing and Healthcare for CBRE’s Valuation & Advisory Services. “Rents at newer communities in high-barrier markets are expected to grow 5% annually over the next three years.”

The average senior housing capitalization rate declined by 12 basis points over the past six months. More than 63% of investors expect a further decrease over the next 12 months, reinforcing the sector’s positive outlook. Capitalization rates are derived by dividing a property’s annual income by its sale price, with a lower cap rate indicating a higher value.