Senior Living Investment Gap Continues To Widen Amid Slow Rate Of New Development 

The senior living industry’s “investment gap” is continuing to grow and could widen to nearly $800 billion by 2050 if the industry does not speed up the rate of new development.

As previously outlined, the senior living industry faces a $275 billion development “supply gap” by 2030 at its current rate of new development. Although that will push occupancy higher in the years ahead, it potentially means the industry is falling short of demand from older adults if it does not sharply increase the rate of new construction.

In a newly updated report released Tuesday, NIC MAP Vision outlined how the industry faces a potential $275 billion investment gap by 2030, a potential $725 billion investment gap by 2040 and a potential $800 billion investment gap by 2050 without a faster rate of new development in the future.

The projected number of adults aged 80 and older across the country is expected to grow 118.7% by 2050 – a pace never before seen in an aging population in the U.S., and one that will require a rapid expansion of new communities in the years ahead, according to NIC MAP Vision’s latest analysis.

Arick Morton, NIC MAP VIsion CEO, told Senior Housing News that both absorption and demand for units is continuing “at a record pace.” In the second and third quarters, 18,000 units were occupied compared to 6,600 units added, resulting in average occupancy in an average occupancy increase by two full percentage points up to 87.1%.

With that demand in mind, senior living companies have been ready to “hit go” on new development projects. But they have so far been stymied by difficult conditions getting financing and some lingering construction challenges.

That is why new construction starts are continuing to lag behind demand. According to the latest NIC MAP Vision occupancy report, the industry added 7,100 new units in the third quarter of 2024, only 1.1% higher than it was in the third quarter of 2023. But that pace is not enough to forestall a development gap ahead, Mortan said.

In fact, without any significant changes, the senior living industry is “projected to fall 50% short of matching the growth of the 80+ population by 2025, with only 25% of the required units developed to date,” the report noted.

“This analysis illustrates that a strong majority of the already low volume of units under construction are expected to be delivered in the near term,” Morton told Senior Housing News. “Barring a sharp and sudden increase in new development in the immediate quarters, this will create an ever-greater margin between high demand and declining new supply in 2025/2026.”

The number of construction starts falling behind inventory growth has only happened two other times: After the global financial crisis in 2008 and immediately after the Covid-19 pandemic.

That said, the industry is “ripe for investment activity,” primarily due to the amount of demand from older adults ahead, according to the NIC MAP Vision report. At the same time, the wealthiest older adults aged 75 and older are projected to grow their household wealth 1.4 to 1.6 times the rate of their peers, “suggesting enhanced affordability for senior housing,” the report noted.

The bottom line is that there is an “urgent need” for new and significant investments in senior living communities, the report noted.

“The industry must leverage innovative construction methods and streamlined regulatory processes to expedite development and avoid potential crises in senior housing availability,” the report reads.

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