Senior housing REITs are still gobbling up communities to add to their senior housing operating portfolios, and competition for assets is increasing. All the while, a small development wave is forming as building becomes more attractive.
In 2026, senior living buyers and sellers are racing toward a record finish. During earnings calls this week, leaders of REITs like Ventas (NYSE: VTR) and Welltower (NYSE: WELL) signaled they still see more to buy ahead. The two companies collectively have invested billions and billions of dollars in 2026 to acquire properties across the U.S. with an eye for communities in growth markets with potential for revenue and NOI growth.
In 2026, Ventas has notched more than $5.2 billion in acquisitions, while Welltower has completed or signed under contract deals representing around $21 billion of investment activity this year so far.
According to a new outlook report from Walker & Dunlop, improving operating conditions, very limited new supply and competition for high-quality assets are reshaping the deal landscape. Institutional-quality assets are often attracting at least 10 or more bidders, while value-add and middle-market assets are attracting about 5 to 10. That represents “a significant shift” from conditions several years ago, the report’s authors wrote.
Capital is “following the fundamentals” as institutional investors and REITs alike butt heads for these high-quality assets in demand markets. Meanwhile, the lack of new development and improving conditions is increasing the “scarcity value” of existing communities, the report’s authors wrote.
Indeed, Welltower CEO Shankh Mitra noted this week that the company is not short of capital. If it’s short on anything, it’s sourcing enough opportunities to fulfill the company’s targets for growth.
That growing scarcity for new deals has increasingly made development more possible. A development wave is forming around the construction of luxury properties, with operators such as Sunrise Senior Living eyeing a $7.5 billion development pipeline of high-end properties that can charge the rates required to build them.
Though leaders of the companies buying communities in 2026 will tell you there is still lots to buy on their radars, I am specifically watching the cost of development relative to the cost of acquiring communities as a major bellwether for what happens next.
For years, buying has been a cheaper option than building. As high demand justifies more development starts, the buy-build equation is shifting. While industry fundamentals still don’t favor a large-scale development wave – and that doesn’t seem to be changing any time soon given how long it takes to develop communities – the fact that development is more possible now reflects a changing landscape that will no doubt influence the future growth of senior living owners and operators.
In this members-only SHN+ Update, I take stock of recent investment activity from the industry’s major REITs and compare them to recent industry research to offer the following takeaways:
- How REITs are finding new deals in off-market transactions
- Conditions affecting pricing in 2026
- A new, albeit relatively small, development wave is forming amid high demand
No end in sight to the REIT SHOP-ing spree
Deep-pocketed companies with longstanding relationships with sellers have in the last few years, especially REITs, have dominated the acquisition landscape for senior housing. That hasn’t changed in 2026.
Leaders of both Ventas and Welltower still report that they can win bids for communities at prices lower than it would cost to build them.
Welltower bought 43 communities in the third quarter of 2026 at a discount to replacement costs of about 10% to 15%, according to Co-President and CIO Nikhil Chaudri. Welltower’s M&A team “bends over backwards to deliver a high-quality transaction experience,” which generates more business down the line, he said.
Ventas similarly has maintained relationships with sellers, “and that’s led to some really attractive acquisition opportunities of luxury senior housing,” Ventas Chief Investment Officer Justin Hutchens said during the company’s recent earnings call this week.
So far, neither company has reported rising interest rates blunting their ability to source off-market deals in that manner. If anything, macroeconomic challenges are pushing more companies into the orbit of large well-capitalized REIT partners, leaders with both companies have said.
But interest rates are impacting the deal and pricing landscape. Financing costs are affecting debt sizing and investment returns and changing buyer and seller expectations. That is especially true for age-restricted and active adult housing, “where investor interest is increasing but pricing and yield expectations remain sensitive to the cost of capital,” the Dunlop & Walker report authors wrote.
“Acquisition, development, recapitalization and refinancing can produce materially different outcomes depending on leverage, financing costs, execution timelines, and assumptions about future NOI,” they wrote. “As capital becomes more widely available and competition for high-quality assets increases, aligning the capital structure with the investment strategy remains critical.”
As the recent REIT activity reflects, investors are still flocking to existing assets that have immediate cash flow and are located in markets with favorable supply-demand dynamics. But some companies, like prolific senior housing investor Bain Capital, are reporting significant premiums on buying communities in certain markets relative to replacement costs. Those conditions are pushing them to more seriously consider new development, even as they look for potential more to buy now.
“We have really reoriented our efforts towards finding development opportunities in those very targeted micro-pockets,” said Ayesha Menon, managing director at Bain Capital, during a panel at the NIC Fall Conference last week.
Small development wave forming
As I noted earlier this month, there is a development wave forming around high-end properties with rates that can pencil out. Sunrise’s $7.5 billion growth push is perhaps the biggest indication that the senior living industry is changing its collective tune about building anew. But, at least for now, the projects most likely to move ahead lie on the upper end of the industry’s rate spectrum.
Indeed, as cap rates have tightened and community values have risen, Menon said that she has noticed more interest for development, indicating for her that a new development wave “is closer than it has been in some time.”
The NIC panel’s moderator, CBRE Capital Markets Vice Chairman and Co-Head of National Senior Housing Aron Will, noted that just two years ago, there were very few investors intently focused on development. Now, he estimates that as many as a quarter of senior living investors are seeking out new development – enough to create a more competitive landscape, but not enough that development hasn’t risen beyond being a “contrarian play” given the relative cost to buying.
Still, he believes that mindset could change in the next 18 to 24 months as investors potentially run short of acquisitions sufficient to fulfill their appetites for meeting demand.
“When you talk to these investors, some of them have the viewpoint of, ‘Well, in the lower-barrier markets, there’s still no supply … so, getting in and penetrating those markets with the highest-quality new assets first is a sound strategy,” he said. “You have other investors on the flip side of the coin who say, “we want to be in sites that are fortress sites and higher-barrier-to-entry markets. … it will be very interesting to see where the capital comes back when it comes back in droves for development.”
Walker & Dunlop said the data shows senior living developers are “selectively” embarking on new projects, though not at the rate they once did in 2017 and 2018. Senior living companies are undertaking both high- end projects in urban and other markets with high rents, and middle- to upper-middle-market projects in secondary and tertiary markets “where sponsors may be able to manage costs through more efficient design, finishes, and amenity packages.”
Lenders have appetite for well-conceived development opportunities, while equity players are more selective, “making sponsor quality, market selection, operator alignment, achievable rents, and project economics important.”
“As competition compresses acquisition yields and pushes pricing for newer assets higher, development may offer a more attractive basis for investors willing to accept construction, lease-up, and execution risk,” the report’s authors wrote. “This shift is creating opportunities for projects that can pair strong local demand with achievable rents and disciplined development costs.”
Of course, any new projects started today will take multiple years to open, and the recent flurry of REIT acquisition activity makes it clear there’s still more to buy. But the industry is now one step closer to its next development wave, a wave that many say cannot come soon enough given the staggering demand ahead.
