The UK’s senior living sector has been growing steadily over the last decade, but 2019 has seen even greater investment commitments than ever before from private equity, institutional capital and family offices alike.
North America is leading the pack, but international investment across the board has been strong. And while the number of deals has increased, so too has the number of new entrants looking to break into the market. Underpinning this trend is the drive by investors to diversify their real estate assets into alternative markets, as some traditional sectors mature or begin to look under pressure. Running in tandem to this is the increased availability of debt funding for both acquisition and development across the spectrum of senior housing sub-sectors – including age-restricted housing, independent living and assisted living.
But with such strong levels of growth to date, what does the future look like for the senior living market, and what are the potential challenges that may need to be navigated?
Overall, we expect increasing levels of activity in the sales market, and the continued expansion of the institutional investment-grade rental market. One opportunity that is often overlooked is the role senior living can play in a development’s wider mixed-used offering. A well-thought out senior living offering can play an incredibly important role in creating intergenerational communities – as well as employment opportunities and a better sense of place. As this trend grows, senior living will become a key part of de-risking sales rates across larger residential masterplans.
We also expect there to be an increased number of joint ventures and management agreements between care companies and developers, as more operators continue to enter the market. Ultimately, the overall increased transparency and rising acceptancy of deferred management charges among residents and investors will lead to increased purchase options for consumers.
Despite this very positive outlook, the sector is not immune from the uncertainty being created by Brexit, however we certainly expect a higher level of resilience in this market due to its strong fundamentals. We anticipate that the sector will continue to expand with a focus on flexible services, access to high-quality care and wellness, an expansion of tenure options, new construction methods and a long-term operational approach.
A substantial structural demographic shift, changing perceptions around the stigma of senior living housing, economies of wealth accumulation and care needs are driving the sector. Seniors are living longer due to the benefits of increased wealth and access to healthcare, while their expectations – in terms of the type and quality of later-living accommodation they desire – are becoming more sophisticated.
If the market is able to meet this demand and provide a better range of senior living options, this will free up much-needed family housing for future generations and allow the sector to continue to thrive.
Tom Scaife is partner – senior living at Knight Frank
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