Senior Housing's Second Act: Capturing the Next Wave of Value

For years, industry observers have waited on the “silver tsunami”: a massive surge in older adults that would reshape demand for senior housing. The demographic swell is finally in motion. The leading edge of the Baby Boomer generation is now aging into the years most closely association with senior housing utilization. In parallel, supply growth has been muted, exacerbated by the COVID‑era disruption to construction followed by a sharp increase in development costs that rendered new projects uneconomical. The result is a favorable setup for outsized value creation as structural supply constraint meets accelerating demand.

In this new landscape, success hinges on disciplined capital allocation and superior operational execution. The most successful managers are adopting a data-driven approach, aligning care models with staffing and tailoring amenities to the specific needs of local markets. As an investment manager, our role at RMR is to implement these principles on behalf of the property owners we represent. We focus on active asset management to deliver operational excellence – through strong execution, informed staffing and dynamic pricing – to unlock value within our clients’ senior housing portfolios while the fundamentals for new development remain challenging.

The 'silver tsunami' meets a supply squeeze

The Baby Boomer cohort is both large and economically powerful, benefiting from decades of home equity appreciation and investment gains. As this generation ages, the impact on senior housing demand becomes more pronounced. The 80+ population, the core driver of senior living utilization, is projected to grow approximately 4.1% annually over the next 15 years, more than double the rate of the U.S. population overall. Unlike younger seniors, this cohort faces increasing rates of functional decline, chronic health conditions and cognitive impairment - risk factors for which living in a senior living community has been shown to produce better outcomes.

This demand wave is unfolding against a supply backdrop far different from what the industry once anticipated. Inventory growth has been declining since 2018 and now sits near 0.6% annually, falling well short of demographic growth. This unmet demand underscores the importance of third-party operators who possess a deep understanding of operating discipline and consistency. For the portfolios we manage, we prioritize these qualities through active asset management, with a structured focus on delivering an outstanding resident experience while ensuring sustainable profitability.

Where value lives now: In the operating model

While the physical asset and market dynamics remain crucial, we believe the primary driver of value in this cycle is operational execution. Both national and regional operating platforms offer distinct advantages beyond simple economies of scale. The most effective platforms are leveraging data analytics, AI and MedTech to enhance resident safety, care delivery and efficiency. Examples include dynamic pricing, AI-enabled fall-detection systems and digital tools that streamline care coordination and reporting. These technologies empower frontline teams, improve outcomes and create significant operating leverage.

However, senior housing is, at its core, a local business. Acuity levels, labor costs and resident expectations vary dramatically by market. Ultimate performance is determined by the teams on the ground. The strongest platforms recognize this, pairing centralized data and best practices with local autonomy.  As the investment manager, RMR's strategy is to find the right operational fit for each property, not just to default to the largest scale. We partner with a diverse mix of national, regional and local operators based on their proven execution capabilities and alignment with the specific needs of each market.

Operator diversifications unlocks value

A diversified operator strategy empowers an owner to match each community with the ideal operator. Beyond this flexibility, diversification creates powerful opportunities for benchmarking and best-practice sharing across a portfolio. By analyzing performance data across different operators and markets, we can identify what works - in sales, staffing, care bundling or resident engagement - and work with operators to apply those insights where they are needed most.

This approach also helps us identify where targeted reinvestment can yield the highest returns. Clear performance diagnostics help pinpoint when and where our managed clients, such as Diversified Healthcare Trust (Nasdaq: DHC), should deploy capital. At RMR, we champion this disciplined capital allocation, leveraging available tools that enhance resident safety, improve labor efficiency and support high-quality care.

Closing the gap: Operational precision and personalization

In the current environment, both outperforming and underperforming assets present opportunities. Our approach as investment manager centers on creating tight alignment between our client (the owner) and the community's operator around a clear set of execution priorities.

For portfolios that have lagged the market, the current environment makes a rapid catch-up both possible and measurable. Our strategy emphasizes the fundamentals:

• Sales and marketing discipline: Driving localized lead generation, ensuring speed to lead and meticulously managing the sales funnel.
• Dynamic rate strategy: Tailoring pricing to hyperlocal markets to better capture value.
• Curated care plans: Designing modular service bundles that adapt to residents' changing needs.
• Strategic staffing: Ensuring the right leadership is in place and incentivized to deliver an outstanding resident experience while maintaining profitability.

Personalization remains a critical driver of pricing power. Families are looking for specificity: care plans aligned with individual needs, delivered by teams who are deeply familiar with the local healthcare network. Operators with strong local execution are best positioned to adapt their service offerings and align rate structures with micro-market dynamics.

Platform advantages: The quiet wins of scale

Thoughtfully applied scale continues to add significant value. Centralized procurement, standardized compliance workflows and portfolio-wide contracts create cost and speed advantages without imposing a one-size-fits-all approach. Data science further strengthens these platform efficiencies. Robust analytics provide a competitive edge in every real estate sector, and senior housing is no exception. With strong data pipelines, investment managers and operators can segment prospects, understand which services resonate in each submarket and pinpoint where their residents are coming from.

As a multi-asset-class manager, RMR brings an additional layer of leverage. We can import proven disciplines from other real estate verticals - such as development, facility engineering and Capex governance - to elevate consistency and free up community teams to focus on what truly creates value: sales, service and the resident experience.

What success looks like in 2026 and beyond

• Sustained occupancy recovery that meets or exceeds submarket benchmarks.
• Above market effective rent growth driven by sophisticated, localized revenue management.
• Increasing operating leverage from platform efficiencies and reduced cost variability.
• Durable NOI growth that outpaces benchmarks, driven by the compounding effects of execution speed and operating leverage.

In short, this is a cycle that will reward owners who partner with a dedicated investment manager to act as a catalyst for performance. As that catalyst, RMR leverages its national, multi-sector platform as a leading advantage, delivering value by guiding a focused approach to operator selection and empowering teams with actionable data. Success will come not from a single strategy, but from the selective deployment of this platform scale combined with the empowerment of local experts to tailor services and pricing to the unique demands of their market.

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Learn more about RMR’s senior living portfolio.

Sources NORC at the University of Chiacgo; Population estimates from the Organization for Economic Co-Operation and Development (OECD) as of July 2025; NIC Map © Data Service in primary and secondary markets as of 4Q25. For more information on the NIC MAP © Data Service, please visit www.nic.org/NIC-map.