How Strong Supply-Demand Dynamics Are Benefiting Health-Care REITs

After weaker pandemic and post-pandemic periods, health care REITs are now operating within a much more supportive environment for skilled nursing and, especially, senior housing, which began in earnest in 2024-2025. Fitch’s sector outlook is “neutral,” supported by a continued benign operating environment.

Demographic and demand trends remain positive amidst a landscape of low or no new construction, and labor costs have normalized, allowing for improving coverage, occupancy and SSNOI growth. Health care REITs have also ramped up equity-funded acquisitions, allowing for rapid inorganic growth while maintaining low leverage. Fitch expects these trends to continue in the intermediate term.

---

---

Leverage and operations have stabilized for health care REITs as a result, and with each company trading at a premium to net asset value, certain companies have meaningfully tapped common equity or increased their pace of acquisitions. Fitch Ratings upgraded CareTrust REIT Inc. to BBB- in May 2025, following its acquisition of a U.K.-based REIT. Also contributing to its upgrade was the raise of more than $2 billion in common equity for expansionary activities over the past few years, which has steadily improved the company’s scale and diversification while keeping leverage low.

Lease restructuring appears to be generally in the rearview mirror as EBITDAR coverage improves for operators. However, recent nonpayment of rent by operators to REITs, while often manageable and one-time in nature, indicates that this risk persists, particularly with private unrated operators where information is less accessible, and that EBITDAR coverage does not tell the whole story.

More recently, new policy proposals have increased the risk to health care REITs and their operator tenants, particularly on the skilled nursing facility side, with the potential for Medicaid funding cuts. The ultimate impact of such cuts (if any materialize) is difficult to predict, especially as not all proposals are equal. Certain policies, such as work requirements for younger beneficiaries, would be less impactful to SNFs and to REITs than other policy proposals given patient demographics. Asset type diversification also helps mitigate the risk of policy changes and Medicaid cuts in particular.

Fitch is monitoring health care REIT fundamentals for developments though it does not expect meaningful changes for the foreseeable future.

Chris Wimmer, CFA, is senior director for Fitch Ratings.