The case for locating senior housing in the center of the real-estate market is a sound one, backed by the power of demography. With the steadily increasing numbers of baby boomers who are entering their 80s, the demand for senior-living units has been rising at a rate unprecedented in the history of the field, while supply has lagged behind demand; as a result, occupancies have strengthened, rents have increased, and the sector has increasingly outperformed the others.
In 2024, senior housing posted an annual return of 3.64%, far outpacing the broader real estate index (which came in under 1%) and ranking as the third-best performing sector that year. Looking at longer timeframes, the story is even clearer: over 1-, 3-, 5-, and 10-year horizons, senior housing has consistently outperformed most other property types (Source: NIC)
Only industrial and self-storage have come close over the past decade. Unsurprisingly, investor sentiment has followed suit. Recent surveys show a majority of investors intend to increase allocations to senior housing, drawn by the sector’s stable income profile and demographic momentum.
Positioning yourself as an informed and careful senior housing specialist who knows where the opportunities for senior housing opportunities are and why — this three-part series is designed for the senior housing industry's brokers, investors and owners who wish to know where the opportunities are strongest and why. This three-part series analyzes in turn the impact of national population statistics and market conditions on senior housing in the state of Arizona, and on the state of Illinois, and on the state of Louisiana. It examines the local population, the local market fundamentals and the performance of senior housing in relation to multi-family, industrial, retail and medical office space.
Investing in Senior Housing in Arizona: Demographics, Market Trends & Opportunity
Arizona’s Demographic Tailwinds
Arizona is aging faster than most of the country — and that’s not an exaggeration. Between 2000 and 2030, the number of residents over 65 is projected to grow by more than 250%, nearly tripling in size. By the end of this decade, just over one in five Arizonans will be 65 or older, compared to only 13% in 2000. That’s a dramatic shift in a single generation.
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This surge is no accident. One of the main causes of this increase in numbers is that Arizona has become one of the favorite places in which to retire, thanks to its warm climate, its modest cost of living, and its retirement-friendly tax structure. Add longer life expectancies into the mix and you have a simple equation: a lot more seniors, living longer, and in need of housing and care.
Another critical layer is health. According to Arizona’s Alzheimer’s State Plan, the number of Arizonans aged 65 and older living with Alzheimer’s is projected to increase from approximately 120,000 in 2015 to around 200,000 by 2025—marking one of the highest growth rates nationally.
Source: Arizona Alzheimer’s State Plan: A Framework for Action
That makes the case for memory care communities as strong as ever. For investors, the conclusion is clear: Arizona’s demographic profile provides one of the most durable demand drivers in the senior housing sector.
Market Fundamentals in Arizona’s Senior Housing
Occupancy is bouncing back.
Occupancy is bouncing back. Like the rest of the country, Arizona’s senior housing market saw occupancy dip during the pandemic, with Phoenix — the state’s largest market — falling in line with national trends. National NIC data show the primary markets bottomed out at 77.8% in Q2 2021 before steadily recovering to 87.4% in Q1 2025 (NIC MAP® Data Service). Phoenix has mirrored this trajectory, with many communities now reporting mid- to high-80% occupancy levels. Demand is running ahead of new supply, a welcome shift for operators and investors alike.
Why the recovery?
Strong move-ins from older adults and a sharp slowdown in new construction. Rising costs and labor shortages forced many developers to hit pause, and some older facilities even closed or converted to other uses. That’s shrunk the available inventory just as demand is climbing, creating a healthier operating environment.
Rents are climbing too.
The NIC MAP® 4Q 2022 Market Fundamentals report shows that asking rents surged 5.5% year-over-year in assisted living, while independent living rose 4.5%—both the highest annual increases since NIC began tracking rents in 2006 (NIC.org).
In Greater Phoenix, base rates reflect these national growth patterns. Assisted living communities typically charge between $3,500 and $5,000 per month, while memory care often exceeds $5,000. This consistent rent growth translates to stronger NOI and cash flows for investors, especially as occupancies recover.
Limited new supply is the kicker.
Unlike the multifamily sector, where cranes dot the Phoenix skyline, senior housing development has slowed to a trickle. Nationally, inventory growth fell below 1% for the first time since NIC began tracking data—a record low. This was confirmed in NIC's Q2 data, where annual inventory growth dropped to 0.97% year-over-year. (NIC.org)
Investment Climate: Yields, Cap Rates & Returns
Arizona offers both yield and growth potential. Historically, senior housing cap rates have run higher than apartments, reflecting the operational component.
Nationally, cap rates in 2023 ranged from roughly 6.5% for Class A Active-Adult communities to 7.6% for Class A Assisted Living (CBRE H2 2024 Survey)
Investor sentiment is turning more optimistic. Surveys from CBRE and JLL show most investors expect cap rates to compress over the next year as interest rates settle and operating performance strengthens. For those buying now, today’s slightly higher yields could look very attractive in hindsight if values firm up in the next cycle.
57% of investors now expect cap rates to compress within 12 months as interest rates normalize and operating fundamentals strengthen, Compared to just 17% of respondents in JLL’s prior survey (JLL, 2025 Investor Survey)
Performance speaks volumes. Over the last decade, senior housing delivered a 9.3% annualized return, outperforming the NCREIF all-property index, which returned 8.3% over the same period.
Income yield was the primary driver—averaging 5.2% annually—with appreciation contributing roughly 4.0%. In the first half of 2025, senior housing topped the NCREIF league tables, posting a 4.0% total return YTD, the highest of any property sector (NIC, Q2 2025).
Opportunities in Assisted Living & Memory Care
The sweet spot in Arizona right now is assisted living and memory care. The state’s 75+ population is expanding rapidly, creating demand for communities that can provide daily support and healthcare services. Suburban and secondary markets — from Prescott to Yuma — remain underserved and offer potential for both ground-up development and repositioning of older stock.
Memory care is an especially urgent need. With dementia cases projected to rise sharply, there’s clear room for dedicated facilities and expanded memory care wings in existing AL communities. Operators who can combine specialized staff training, secure environments, and wellness programs will find strong demand and premium pricing.
Bottom Line
Arizona checks nearly every box for senior housing investors:
Demographic strength: A rapidly growing and aging population.
Healthy fundamentals: Occupancies and rents trending upward.
Attractive yields: Cap rates that offer spread over traditional multifamily and office.
Supply constraints: Very limited new development, especially outside Phoenix.
Growth niches: Rising need for assisted living and memory care.
For brokers and investors focused on healthcare real estate, Arizona is one of the most compelling markets to watch. The fundamentals aren’t just good — they’re durable, backed by decades of demographic momentum.
Explore Live Opportunities in Arizona
Looking to act on these trends? Apex Commercial Exchange currently has medical office and senior housing properties in Illinois available through our online auction platform.
References
1. https://www.nic.org/blog/senior-housing-2024-total-return-of-3-6-outperforms-broader-ncreif-property-index-by-3-1-percentage-points
2. https://oeo.az.gov/population/projections
3. https://www.americashealthrankings.org/explore/measures/pct_65plus/pct_65plus_aian/AZ
4. https://aging.azgovernor.gov/sites/default/files/aging/documents/azalzheimersstateplanaframeworkforaction.pdf
5. https://www.nic.org/blog/senior-housing-occupancy-continues-climbing-in-first-quarter-2025/
6. https://www.nic.org/blog/nic-map-vision-4q22-key-takeaways-senior-housing-demand-increased-2-8/
7. https://www.nic.org/blog/senior-housing-posts-highest-ncreif-property-type-return-in-the-first-half-of-2025/
8. https://www.cbre.com/insights/reports/us-senior-housing-and-care-investor-survey-h2-2024
9. https://www.jll.com/en-us/insights/market-perspectives/seniors-housing-care-investor-survey-and-trend-outlook
10. https://www.nic.org/blog/ncreif-report-1q23-positive-total-return-in-senior-housing/
11. https://www.nic.org/blog/senior-housing-posts-highest-ncreif-property-type-return-in-the-first-half-of-2025/