As the oldest baby boomers reach their golden years, investors are racing to stake their claim in senior housing.
Demand for senior living facilities is on track to surge over the next decade, driven by a tidal wave of aging Americans, while new construction sits at a 14-year low. Rushing to profit from the mismatch are investment firms looking to snap up prime developments – and get a cut of the operational upside.
“The senior housing mainstays have been very aggressive on the external growth front in acquiring senior housing assets in the private market for a couple years now,” says Michael Stroyeck, a healthcare analyst at real estate research firm Green Street. “But now, you’re seeing capital from everywhere chasing this space.”
The U.S. senior housing sector’s transaction volume topped $5.8 billion in this year’s first quarter, up nearly 80% from the same period in 2025, according to the National Investment Center Market Analysis Platform.
One local player is diving head-first. Shifting market dynamics have tipped Westlake Village-based LTC Properties’ focus away from mainly the skilled nursing properties it cut its teeth in and toward senior communities that include independent living. By buying up properties and converting its existing portfolio of traditional senior housing leases under an increasingly popular, operationally intensive model, the real estate investment trust has unlocked new levels of growth.
Since launching in May 2025, LTC’s senior housing operating portfolio strategy has ballooned to 39 properties. The company’s SHOP acquisitions and conversions represent over a third of its total gross investments at $1.3 billion and are tracking to surpass 55% by year-end. The biggest overhaul in LTC’s 34-year history opened the door to significantly higher internal rates of return and net operating income growth but came largely out of necessity, says Pam Kessler, the company’s co-chief executive.
“Looking at the confluence of demographic trends and lack of supply, it was creating a really good environment for senior housing investments,” she says. “In order to do that, we were going to need a different structure than the traditional triple-net lease structure.”
The triple-net leases that once dominated LTC’s senior housing portfolio burdened tenants paying a fixed rent with all property-level expenses like taxes, insurance, maintenance and utilities. When occupancy plummeted during the COVID-19 pandemic, senior housing landlords felt the hit in full force but couldn’t recoup the upside without more skin in the operating game, says Clint Malin, the other co-chief executive of LTC.
“We thought, ‘Well, if we’re always already subject to the downside risk, and the scalability was not there, why don’t we accept and participate in the potential benefits of this?’” he explains.
To investors still heavy in triple-net senior housing leases, the pandemic was a wake-up call to the untapped opportunities sitting out of their reach.
“The lease structure in the private-pay senior living industry really doesn’t exist other than on the margin,” Malin says. “By not investing in enterprise value, real estate and operations combined … we were excluding ourselves from nearly 100% of the market.”
A perfect storm
Senior housing’s supply and demand fundamentals paint a strong case for investment. The share of Americans over the age of 80 will grow at a breakneck speed over the next decade, increasing from 14.7 million to nearly 23 million by 2035, NIC MAP estimates. Construction on the senior living and nursing care facilities they’ll age into has collapsed to levels not seen since 2012, dampened by high interest rates and material and labor costs. Occupancy in the sector is climbing to 90%.
The environment made healthcare REITS the best-performing sector last year, returning 28.5%. They also outperformed the broader U.S. equity market, including the Standard & Poor’s 500.
“This is a really good growth story, and we’ve been pounding on the table for a couple years now that we really like senior housing,” says Green Street’s Stroyeck, who noted that easing expense pressures in the last two to four years have allowed for revenues to recover and momentum to build.
Chicago-based healthcare REIT Ventas Inc., one of the sector’s most prolific buyers with a $4.5-billion investment target for 2026, reported NOI growth of 17% in its most recent earnings.
“Ventas’ momentum continued in the second quarter,” says Debra Cafaro, the company’s chair and chief executive, in the earnings release. “We delivered strong enterprise results, executing on our strategy to capture the unprecedented opportunity in senior housing through powerful organic and external growth in our senior housing operating portfolio.”
The investors flooding into senior housing want exposure to cash flows, with nearly every major healthcare REIT shifting aggressively to the SHOP model. The operationally involved structure has hit the mainstream, but it’s been an option for senior housing landlords for nearly two decades. A rule change in 2007 allowed REITs to offer leases with rents that aren’t set at a prescribed amount but tied directly to a property’s revenues.
Looking to flip its existing portfolio to assets with a higher organic growth portfolio, LTC debuted its SHOP strategy last year by terminating leases on 13 communities and turning them into managing agreements.
“We launched the SHOP platform through two cooperative conversions of leases,” Malin says. “With deals that are expected to close, we will have 13 operating partners, probably in the next 30 to 60 days … We’ve gotten tremendous traction in growing relationships.”
In an ongoing spree, LTC has invested $379 million in SHOP acquisitions so far this year and expects to close another $321 million in the third quarter. Recent buys include two communities in Minnesota comprising 215 units priced at $95 million and a 147-unit community in Wisconsin that sold for $73 million.
The company expects to spend up to $900 million on its SHOP strategy by year-end, a step-up from its typical annual investment of $100 million to $200 million. The strategy shift drove LTC to add three new full-time employees – bringing the total headcount to 38, including interns and part-timers – and devote time to developing a data platform to track properties’ operations and performance.
“It’s just what you have to do to be successful with a SHOP platform, and that is building out all your capabilities,” Kessler says.
Supply shift will take years
The gold rush that’s seen REITs flock to senior housing assets may dry up once construction ramps up, but the eventuality isn’t a near-term concern, Stroyeck says.
“It’s going to be a long time until we hit oversupply,” he says. “These construction timelines are pretty lengthy.”
Annual inventory growth of senior housing units fell below 1% in last year’s second quarter for the first time since NIC MAP started keeping track – and has continued to drop further since.
Kessler says she doesn’t anticipate a construction comeback until at least three years out. In the meantime, LTC is casting its net far and wide to snap up well-priced, in-demand properties, she says.
“If you can buy a property cheaper than you can build it, people are buying properties. Once that map flips and you can build a property cheaper than you can buy it, that’s when the building starts,” Kessler says. “For right now, we have that ‘make hay where the sun shines’ attitude of there’s opportunities out there for us, and we’re not doing all of them.”
Where there’s a frenzy, there’s room for ill-judged plays, Stroyeck warns. Investors who are newer to the sector and racing to get their feet wet could end up making some “bad deals” that won’t come to light until the market shakes out, the analyst says.
“Bidding is very competitive,” Stroyeck says. “I think there’s folks out there who are going to have some capital allocation missteps and maybe reach on some assets that they shouldn’t.”
In preparation for the day new supply shifts market dynamics, LTC targets newer properties – usually those built 10 years ago or later – that don’t need a capital-intensive “turnaround” effort.
“We’ve been very, very specific on the type of assets we’re acquiring to make the asset management side easier on the front end and, (with a) long-term perspective, to be better positioned to compete,” Malin said.
