During an uncertain time in the worlds of tech and retail, the only predictable outcome is that everyone will get old. Demographic shifts across the world mean that working age populations are set to fall in most European cities. The upside is that this will create universal demand for retirement housing. But how are investors set to tackle “third age” residential?
The UK’s nascent later living market has the potential to scale up quickly but will need to overcome a number of hurdles and challenges if it is do so, an expert panel told Property Week on a RESIcast.
Compared to more mature markets like Australia, New Zealand and the US, Britain currently has a tiny later living market, with only 0.6% of over-65s in 2017 living in retirement communities, according to a Local Government Association report.
However, with the ONS predicting 15 million people will be over 65 by 2030, there is already latent long-term demand building for retirement housing stock. Research from JLL estimates that there is a potential requirement for an additional 725,000 care and retirement homes by 2025.
“That is the biggest issue confronting the UK at the moment, in that there’s a huge tsunami of people who are going to turn 70 very soon and few options for them to downsize,” says Eugene Marchese, co-founder of developer Guild Living, which has a UK later living joint venture with Legal & General.
Knight Frank forecasts the UK’s later living sector will increase by 40% in value over the next 5 years to £55 billion.
Richard Jackson, managing director at Apache Capital, which has a pipeline of 6,500 build-to-rent homes with partner Moda Living, is similarly bullish.
“I think we’re only seeing the tip of the iceberg in what’s to come. In this sector
there is huge investment potential for development and operation, for what is structurally a long-term support demand requirement for the UK and we’ll only see an increasing number of institutional investors,” Jackson says.
One key challenge for later living is making itself an appealing option to over-65s, as opposed to hanging onto a home.
Today’s and tomorrow’s retirees will want residences that not only offer care facilities, but allow them to pursue an active lifestyle, according to Marchese.
“Later living is now about creating a lifestyle community, a third-age of living. We’re talking about people who are in their 70s who are still active, working, travelling. They don’t want to be isolated. But the people who come and live with us could be the most liberated in their life,” Marchese adds.
Richard Jackson, managing director & co-founder at Apache Capital Partners
Rory O’Hagan, director at Assael Architecture
Eugene Marchese, director of innovation & design at Guild Living
Location and design will play a crucial role in making these developments appeal to residents.
Three quarters of 2,000 homeowners and renters over the age of 65 surveyed by Knight Frank recently said that having a later living scheme located close to town centres was important.
Rory O’Hagan, director at Assael Architecture, thinks making later living aspirational will help drive demand.
“I think we need to make aspiration the driver. Before, it was usually a crisis, a bereavement or a fall that was the biggest driver in terms of people moving into accommodation for older people in this country, but actually we can turn that on its head,” he says.
O’Hagan adds that drawing upon lessons from build-to-rent will also aid later living in providing the services residents will desire.
“It’s about a synthesis of design, care, service and doing that at scale and looking at lessons we have learnt in the built-to-rent sector in terms of delivering that holistic care,” he says.
Given that these developments will be housing elderly, providing quality care facilities alongside other amenities will be crucial.
“Those operators who provide genuine care on site as and when it’s required, and that flexibility, will continue to do extremely well. Those models where people have offered care but not actually provided it in reality will be the operators that will struggle,” notes Jackson.
Though the UK’s later living market is still very much in its infancy, that will leave room for innovation.
“The UK is starting with a clean sheet of paper with the potential to develop a model that the rest of the world will want to copy,’’ says Marchese.
You can listen to this podcast via iTunes, Spotify, or SoundCloud or listen to it through the player above. This podcast was produced by Blackstock Consulting [www.blackstock.co.uk] founder Andrew Teacher and you can Tweet your views @andrewjteacher and @RESIevent
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