Nursing Home Occupancy Just Hit Its Highest Level Since 2016 — But New Construction Is Still Stuck Near Record Lows

Nursing home occupancy is climbing again, rents are rising at the fastest pace since the financial crisis, and yet almost no one is breaking ground on new buildings. That’s the strange picture coming out of a new Marcus & Millichap report, which lays out a sector where demand is finally outrunning supply — but the math on new construction still doesn’t pencil.

According to the brokerage, skilled nursing occupancy topped 87% in the first quarter of 2026. That’s the highest mark recorded since 2016, and it’s been enough to push annual rent growth above 5% — a pace the industry hasn’t seen since 2008. NIC MAP data cited in the report shows the sector even added new inventory for the first time since 2017, a small but symbolically loaded shift after nearly a decade of contraction.

Why the building boom isn’t happening

The catch is that almost none of those tailwinds have translated into a wave of new construction. Elevated borrowing costs, expensive labor, and stubbornly high materials prices continue to make new skilled nursing projects hard to justify on a spreadsheet. Industry reports note that the development pipeline remains near historic lows, even as occupancy keeps inching up.

That dynamic is doing real work for existing operators. With supply effectively frozen and demand from an aging population accelerating, owners of well-located buildings are watching pricing power return to the sector for the first time in years. It’s a setup that helps explain why investor sentiment has shifted so sharply — a point recently made by one major lender who pointed to the three forces driving skilled nursing investments back into favor.

The Sun Belt is taking the deals

Capital is flowing, but it isn’t flowing evenly. Investors are concentrating their bets in Sun Belt markets, where demographic growth and net migration are stronger and acquisition yields are still attractive. Transaction volume in the U.S. Southwest nearly doubled year over year, the brokerage said, even though the region posts the lowest occupancy rates in the country.

Coastal markets, by contrast, are seeing a pullback. The Northeast and Pacific regions still claim the highest occupancy levels nationally, but pricing has gotten rich and yields have compressed, leaving buyers cautious. Investment activity in both regions slipped slightly.

A workforce that won’t fully recover

The other restraint on growth has nothing to do with capital markets. Nursing home employment is creeping back, but it’s still well below pre-pandemic levels, and the recovery is losing steam. Job growth slowed to 2.6% between January and March, another deceleration in a multi-year trend.

Operators aren’t really expanding their headcount — they’re treading water. The brokerage found that high turnover continues to offset hiring gains, meaning facilities are mostly replacing workers, not adding them. One small bright spot: a softer labor market in other service industries could nudge more entry-level applicants toward health care jobs.

For now, the sector is left in an unusual place. Rents are climbing, occupancy is recovering, and demographics all but guarantee more demand. But until construction costs ease or reimbursement makes new builds viable, the industry is going to have to squeeze more out of the buildings it already has.