‘Ready to Grow, Struggling to Build’: Inside the Current State of Senior Living Development and Construction

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“Ready to grow, struggling to build” – I think that sentiment from NIC Senior Principal Omar Zahraoui on stage at our recent BUILD conference perfectly describes the state of the senior living industry in 2025.

On the one hand, four consecutive years of demand outpacing the rate of new construction is pushing average industry occupancy closer to 90% ahead of the new year, according to NIC MAP data. At the same time, growth of the age 75 and over population is set to eclipse annual inventory growth through 2030.

On the other hand, construction activity is near or at record lows, and the number of new projects is either minimal or flat in most markets. On paper, limited new supply and rapidly rising demand should have led to a substantial uptick in construction as it has in the past. But as of 2025, that has not happened. In fact, 8 of the 31 primary markets that NIC tracks experienced negative inventory growth between the third quarter of 2022 and the same period this year. A little fewer than 60% of the markets NIC tracks have no new senior living projects underway, while about 20% have just one new project underway.

Making matters worse is the fact that about half of all senior living communities are 25 years old or older. At the same time, construction timelines have risen to an average of 29 months in 2025.

The clock is ticking, and with every passing year the window to serve a new generation of older adults gets smaller. To Frontier Senior Living CEO Greg Roderick, the senior living industry must kick growth into higher gear over the next four years if it hopes to meet demand.

“We’re seeing some builders out there building huge buildings, which is great. They need them,” Roderick said during a panel discussion at BUILD. “But we need quite a few more in pretty much every market, it seems, to hit this demand.”

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But make no mistake, senior living operators, investors, developers and owners are in 2025 still finding ways to grow – albeit slowly – with planning and creativity. Companies like Belmont Village are subsisting on high-end projects with financial math that can underwrite, while others are using regional strategies, middle-market offerings and more creative financing to expand.

“The combination of terrific experience on how to build a really world-class building with decent economics, and … the rate that we can charge for the value that we deliver enables us to continue safely underwriting new developments,” Belmont Village CEO Patricia Will said during a panel discussion at BUILD, which Senior Housing News held last week in Dallas. “We don’t stop.”

In this members-only SHN+ Update, I analyze what we heard during our panels at the BUILD conference in Dallas last week to offer the following takeaways:

• The current state of senior living construction and development and what might come next
• How senior living operators are making the most of current conditions
• Why regional operations, middle-market models and other strategies could help the industry grow now

‘State of equilibrium’ for now, new growth cycle possibly forming

Demand is high and rising. NIC data shows that for every 10 new units that open in any given market, 31 are occupied and absorbed. But the senior living industry is still in a state of “equilibrium” with regard to growth in 2025, according to Greg Puklicz, president of Dallas-based 12 Oaks. Rental rates are a big reason why.

The company has increased rental rates for residents in the last few years, but even so, it still would need to raise rates another 25% to 30% before it can pivot back to new development.

“The rents are key, because if the rents were high enough, we could build at $300,000 a door and be able to lease them up,” Puklicz said.

Puklicz believes that players like Belmont Village, which can command high rates with high-end projects, will be able to notch new growth in that manner. But “for a bread-and-butter, middle-america type play on new construction, the numbers simply today don’t work.”

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“Capital partners today, based on today’s interest rates, are not going to trust their crystal ball or our crystal ball to say that those rent increases, interest rate reductions and construction prices are going to hold. That puts a big full stop on a development pro forma today,” he said. “That’s just a reality of the marketplace.”

That said, Puklicz is also not overly pessimistic about the road ahead. He doesn’t see the current period as “do-or-die” for senior living, and instead believes that a real estate reset will precipitate a development “breakthrough” in the next couple of years.

The senior living industry has shifted from a “demand story” seven or eight years ago to “supply, no supply axis” in 2025, Zahraoui said.

“I don’t think developers are short on ideas. I think some of them are short on margins,” he said. “Obviously, conditions aren’t ideal, they’re not perfect. But I think if we wait for the perfect conditions, the risk is we’ll meet perfect demand with no product.”

Katie Pelczar, chief investment officer at GSI under senior housing nonprofit Transforming Age, said she believes the industry is seeing a “perfect storm” with regard to demand and construction. Other sectors, like multifamily, are slowing down expansion and coming off a demand cycle defined by rapid growth. Fewer projects there could aid construction costs and the availability of construction workers for new projects.

“We have this sort of exciting moment where everybody out there in the world of real estate is suddenly opening their eyes, understanding the demographic wave and understanding that maybe they should be investing in senior housing. We’re going to have to work hard to educate them,” Pelczar said.

NIC’s data shows that a big development uptick could be just around the corner. Historically – at least in the 1980s, early 2000s and after the Great Financial Crisis – when new supply dipped to about 1% of total inventory as it has today, that preceded an industrywide real estate growth cycle within five years.

“That suggests signs of another cycle forming,” Zahraoui said. “Given today’s long construction timelines, we expect supply growth to remain moderate at least through 2026. But the good news is, unlike the last supply cycle, the next one – likely beginning in late 2026 or beyond – will arrive in an environment of robust demand growth, and could both peak later and last longer.”

Notching growth while growth is tough

While the senior living industry is struggling to grow on the whole, individual senior living companies have leaned on different strategies to keep the growth wheel turning.

For example, Belmont Village positions its new communities at the upper end of its market, which ensures it can charge rates high enough to make the projects underwrite.

“We are able to raise the capital or have the capital committed in advance to go forward. Now, you can’t do that if you’re trying to do 15 things at once,” Will said during the panel discussion at BUILD. “So what we try to do – and have really since I founded Belmont – is find a few great sites that we’re very patient in getting, if that, per year.”

Amid its market “equilibrium,” 12 Oaks has shifted focus to revamping its “vast supply” of older properties. The reason for doing so is largely due to replacement costs, where 25-year-old properties are transacting between $50,000 and $100,000 per unit, while larger 150-unit communities become even more expensive at a minimum of $130,000 per unit to replace. The process allows 12 Oaks to maintain its lower rent rates that are attractive for residents, which Puklicz said is key.

“We are focusing on the vast supply of older properties and looking at rehabbing and rejuvenating those communities on a priority basis before we consider new development,” Puklicz said at BUILD.

Another avenue that senior living organizations are pursuing is pursuing a middle-market strategy that can widen its pool of potential residents. 2Life Communities is exploring this through its Opus brand, which operates under a continuing care retirement community model in order to collect entrance fees to cover the construction loan cost. The model “marries real estate with services,” according to Denise McQuaide, chief of middle market innovation at 2Life, and can be adaptable to a variety of locations because it doesn’t move residents around between levels of care.

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Innovation Senior Living is trying a new approach as well with its Longevity Day Club, a nonresidential adult day care program. The idea is to allow residents access to additional services while being able to stay home, removing real estate from the equation entirely. The model will be private pay as a way of attracting additional seniors while focusing on activities meant to “expand their health span.” The best part, according to CEO Pilar Carvajal, is the clubs can be built in small spaces and be replicated quickly to serve the middle market.

Operators like Archwood Living have targeted smaller and regional markets where land is cheaper to acquire and develop on.

“Instead of paying $4 million for a piece of land, you’re paying $300,000,” he said.

Archwood Owner Trent Czisny said that developing in smaller markets can avoid the need to be the “most sexy building in town.”

Instead, small things such as focusing on dining or wellness programming can help an operator stand out in these kinds of markets. From Czinsy’s perspective, there is a “massive opportunity” for developing in these markets at the moment, though operators would be wise to spread them out in a variety of smaller communities within 50 or 60 miles that can be overseen by one regional director.

While staffing remains a challenge across the industry at large, there are more unique challenges when operating these kinds of markets. Staff can come from a wider area and live on more modest incomes with lower housing costs, but they may be lacking in transportation availability. However, Czinsy is optimistic about those challenges easing as the economy continues to change.

And the coming years can be bright for development, particularly in smaller markets looking to offer incentives like tax breaks for operators and businesses to come to them.

“They are begging to have development happen in their city and in their towns,” Czinsy said.

The bottom line is, as Zahraoui noted, senior living operators should not wait for the perfect moment to grow. That’s a sentiment shared by Frontier’s Roderick, who said that “something’s going to have to change to get a lot of new product under construction in the next 24 months.”

“The only way to do that is to really start in earnest,” he said.