By Jane Adler
Similar macro trends are shaping both seniors housing and skilled nursing. The aging population continues to increase demand for services. Occupancies are rising. Limited new development has helped to keep competition in check.
Meanwhile, technology promises to improve operational efficiency and potentially cut expenses. Industry consolidation is ongoing. Older buildings are being renovated. Prices for quality properties are rising, and investors are eager to invest in both seniors housing and skilled nursing.
Both segments face similar challenges too. Although the worker shortage has eased somewhat, operators continue to struggle with workforce issues. Recruitment and retention remain top priorities.
The cost of debt capital is high. And resident acuity continues to rise, making operations more expensive to meet the growing health care needs of residents.
But that’s where the similarities end.
Skilled nursing facilities face a very tough regulatory environment. President Trump signed the budget reconciliation bill into law on July 4 that introduces several important changes. The legislation includes a 10-year delay on the federal staffing mandate for nursing homes and no change on nursing home provider taxes. But it also introduces $940 billion in Medicaid spending cuts over 10 years that could impact skilled nursing facilities since Medicaid is a major payor for nursing home care.
At the same time, referral sources rely more and more on home health services instead of skilled nursing. And value-based care has introduced new market dynamics (see sidebar).
Despite these challenges, skilled nursing is an essential service for those who need it. “The skilled nursing sector is in pretty good shape right now,” says Vikas Gupta, chief investment officer at Omega Healthcare Investors (NYSE: OHI), a publicly traded REIT based in Hunt Valley, Maryland, which owns seniors housing and skilled nursing facilities.
“We have the tailwinds of favorable demographics, and the staffing issues are gradually being resolved.”
Most of Omega’s 711 skilled nursing facilities no longer rely on employment agency staff to fill workforce gaps, notes Gupta, a sign that the worker crunch is easing. And while there is some uncertainty over Medicaid reimbursements, he predicts that “skilled nursing will be okay.”
Occupancies are up
After a pandemic slump, occupancies at skilled nursing facilities are rising, according to Raleigh, North Carolina-based NIC MAP, which tracks the sector.
The first quarter of 2025 marked the 16th consecutive quarter of occupancy gains in the top 31 NIC MAP primary markets. Nursing home occupancy during the first quarter rose to 85.9 percent, compared with 83.9 percent during the same period a year ago.
Demand for nursing home care is expected to continue to climb as the massive baby boomer generation ages. The U.S. Department of Health and Human Services estimates that a person turning 65 today has a 70 percent chance of requiring long-term care services at some point in their later years.
The Sunbelt states, where a lot of older people retire, are projected to have the greatest need for skilled nursing services.
While demand is increasing, the number of skilled nursing facilities and beds is decreasing, according to Bill Kauffman, senior principal at the National Investment Center for Seniors Housing & Care (NIC) based in Annapolis, Maryland.
In the first quarter of 2021 there were 5,711 freestanding skilled nursing properties with 725,862 beds in the top 99 markets tracked by NIC. In the first quarter of 2025, there were 5,489 properties with 697,051 beds.
“More than 25,000 beds are gone,” says Kauffman.
Skilled nursing properties close for a variety of reasons, sources say. Government reimbursements in some states may not cover the rising cost of care. Some single-site operators close due to the ongoing impact of the pandemic related to staff shortages and growing pressures from payors. Obsolete buildings are expensive to bring up to date. Staffing is an ongoing challenge, especially in rural areas.
In some cases, nursing homes limit admissions because they lack the staff to care for additional residents.
Small operators-owners and nonprofit organizations are selling their facilities. “There are many facilities where families have owned them for multiple generations and are looking to sell,” says Moishe Gubin, chairman and CEO at Strawberry Fields REIT (NYSE American: STRW). “We are easily looking at 200 to 300 deals a year.”
The South Bend, Indiana-based company owns and leases 140 healthcare facilities in 10 states, including nine skilled nursing facilities recently acquired in Missouri for $59 million.
Regional clusters thrive
Industry consolidation is under way, sources say. Buyers are concentrating their purchases in regional clusters to obtain operational efficiencies.
The Ensign Group (Nasdaq: ENSG), for example, has been on a buying spree. From 2020 to 2024, Ensign added 10,375 skilled nursing beds to its portfolio. Ensign continued its growth trajectory in the first quarter of 2025 by adding 1,906 skilled nursing beds.
Based in San Juan Capistrano, California, the company had a total of 33,547 nursing beds at the end of 2024, according to its Form 10-K filed with the Securities and Exchange Commission.
In February 2025, Ensign purchased Bender Terrace, a 120-bed skilled nursing facility in Lubbock, Texas. The seller was a single-site independent owner looking to exit the industry due to challenges of operating a single facility, according to Ryan Saul, who brokered the transaction. Saul is senior managing director at Senior Living Investment Brokerage (SLIB), which is headquartered in Wheaton, Illinois.
Separately, Ensign purchased four other skilled nursing facilities last February in the Texas market. The company’s strategy is to establish clusters of properties in new markets and to grow its presence in established geographies, according to its first quarter of 2025 results.
The company is deepening its presence in the Southeast and sees further opportunities for growth in newly entered states like Tennessee, Oregon, and Alaska.
Omega Healthcare sees opportunities for growth in the United Kingdom (UK) where industry consolidation is also under way. The UK has an aging population and the country’s skilled nursing environment is similar to that of the United States, according to Gupta. “It’s a great place to invest.”
In April 2025, Omega acquired a 45-property portfolio of care homes in Scotland and Jersey (an island in the English Channel) for approximately $340 million. The portfolio will be leased to four existing Omega-affiliated operators and two operators that haven’t previously worked with the REIT.
More mergers ahead
SLIB’s Saul expects more consolidation in skilled nursing. “There’s a significant amount of buyer demand. Investment groups are looking for acquisitions,” he says.
The number of buyers seeking properties has nearly doubled in the last two years, according to Hank Fuller, director at Evans Senior Investments, a brokerage firm with offices in Chicago and Denver. Buyers include institutional capital sources, private family offices and other groups.
Property prices are rising, according to Brendan DeSilvia, director of mergers and acquisitions at Evans. In the last five years, he estimates prices for skilled nursing facilities have risen 50 percent across the country, though prices have recently plateaued.
Fuller says prices are currently more than $100,000 a bed in most markets, depending on many factors including the state’s Medicaid payment rates for long-term care residents receiving assistance.
Medicare payment rates for in-patient care at a skilled nursing facility increased 4.2 percent for stays in 2025.
Record sale prices have been recorded in several states. In January 2025, JLL Capital Markets completed the $33 million sale of Coronado Ridge Skilled Nursing and Rehabilitation Center, a 121-bed skilled nursing facility in Henderson, Nevada. It was one of the highest sales prices in the state at nearly $273,000 per bed.
To boost Medicare reimbursements, owners and operators are adding special services, such as respiratory, dialysis and behavioral units. “That’s a significant upside,” says DeSilvia at Evans.
Veteran property broker Mark Myers notes that skilled nursing facilities are one of the last segments of commercial real estate where the internal rate of return and cap rates are higher than loan costs. Borrowing costs of 7 to 7.5 percent can generate 15 percent returns.
“That’s a nice spread,” says Myers. He recently launched his own brokerage firm, the Kiser Group, based in the Chicago area.
A big headwind for skilled nursing is the new government spending bill, just signed into law by President Trump. Besides the aforementioned delay in the staffing mandate and no change on nursing home provider taxes, the industry is concerned about the downstream effects of Medicaid cuts.
Medicaid reductions will impact hospitals and threaten home and community-based services, which are likely to push more people into nursing homes without reimbursement increases.
“Any reduction in resources within the overall care continuum cannot be taken lightly,” says Clif Porter in a statement. He is president and CEO of the American Health Care Association and National Center for Assisted Living (AHCA/NCAL).
The industry continues to lobby the government for immigration reform to help ease staffing shortages. On the plus side, a federal rule mandating minimum nursing home staffing was struck down by a court in April 2025.
Development is slow
New construction is very limited, but some new skilled nursing facilities are being built.
PruittHealth, based in Norcross, Georgia, owns and operates 102 skilled nursing facilities, along with 26 hospice and 28 home health services. It also has 13 assisted living communities and a $350 million continuing care retirement community under construction in Raleigh, North Carolina.
The healthcare services provider has opened five new ground-up skilled nursing facilities in the last five years in Florida, bringing Pruitt’s total number of skilled nursing facilities there to 11.
A new project also opened in Tennessee and two replacement facilities were built in North Carolina and South Carolina. “We are opportunistic,” says Neil Pruitt, Jr., chairman and CEO at PruittHealth. “We look for partnerships with family owners or hospitals, or we build new.”
In 2024, PruittHealth entered into a partnership with Southeast Georgia Health System to manage their skilled nursing centers in Brunswick and St. Marys, Georgia.
PruittHealth’s new buildings feature high-end finishes and private rooms. Some facilities also include a special care unit, such as respiratory therapy, depending on the needs of the market.
In May 2024, PruittHealth Pensacola opened in Florida featuring 120 units. The facility includes 24 concierge suites that offer additional services such as private dining areas.
Projects require creativity. For example, Omega and its operating partner Cincinnati-based CommuniCare bought an older assisted living property in Silver Spring, Maryland, and converted it into a skilled nursing facility. The renovation took a year.
States control the number of nursing home beds through a certificate of need (CON) process. In Silver Spring, the excess licensed beds from another location, which had wards with three to four beds to a room, were transferred to the newly renovated property. “We work with sophisticated operators,” says Gupta.
Knowing the market is key
Vancrest Health Care Centers based in Van Wert, Ohio, operates 11 skilled nursing and nine assisted living facilities in Northwest Ohio. “We buy old nursing homes and build new campuses,” says broker Myers, an investment partner in the Vancrest properties.
Vancrest buys old nursing homes to obtain the certificates of need, which are transferred to the new buildings.
The new campuses typically include 50 to 60 skilled nursing beds along with some assisted living units. Six projects have been built so far using this strategy. The properties are all located in small towns.
Vancrest broke ground on an $18 million facility in July 2024 in Upper Sandusky. Vancrest had purchased an old nursing home from United Church Homes.
The new facility, which was built next to the old one, features 99 skilled nursing beds, a 40-unit assisted living facility and 10 memory care units.
Vancrest is not expanding to other states, according to Myers. He says Ohio has a good reimbursement fee schedule and offers extra payments for quality care. Also, the properties are located within a 2.5-hour drive radius of the company’s headquarters, which makes it easier to manage operations.
“We will stick to that area,” says Myers. “This is a regional business.”