Demographics and market fundamentals mean prospects for the senior living sector are good, but there are still some barriers to breakdown. What is important is that it fulfils the requirements from all parties involved – Investors, Developer/Operators and the residents and provides future proof stock with ESG firmly in mind.
Here are four key takeaways from our Capitalise Living Conference.
1. Evolution but stigma remains
The senior living sector has evolved in the past 20 years. The focus tended to be mostly on the affordable sector and housing associations.
Fast track forward to today, and the range of offer has expanded from the downsizer age exclusive developments to the larger care villages. The latter has become more operational with amenities like restaurants, gyms, spa facilities and wellness offerings. All things which enable people to enjoy live their best lives in retirement.
Despite this, there is still a stigma attached to housing products specifically aimed at people post-retirement. Over the years, the downsides of ‘care homes’ highlighted by the press have tainted the whole sector when the offer is far broader.
Operators report that in resident surveys, most residents wish they’d made the move into retirement living homes and communities sooner.
So there is work to do on the messaging around the sector to enable a cultural shift.
2. Homes-to-buy don’t suit all
Historically the focus for the senior living sector has been on product to buy, with only 1% of the stock available for rent. The industry view, as highlighted by panellists at the Living conference, is there isn’t a one size fits all solution.
Choice of tenure, whether for sale, rent, or shared ownership, will become more important as the older population grows.
According to BNP Paribas Real Estate research, 80% of 65-plus-year-olds own their home giving them housing equity to help fund their retirement and living in later life. However, home ownership is in decline, which means the number of those in a position to buy a senior living property will shrink in the coming decades.
Research also shows that renting is a growing choice, with 48% of over 65s saying they want to rent their next home. Feedback from those offering rental product is that there is huge demand with take up between 20-50%. The consensus is that a blend of rent and for-sale properties is the ideal at present providing choice and flexibility.
3. Supply delivery remains a challenge
In the next ten years, there will be twice as many people over 65, but the supply of homes supporting senior living is extremely limited. Currently, there are 7,000 units a year being built, but according to the Mayhew report, that number needs to rise to 50,000 a year.
The market potential is attracting investor interest, but the challenge they face is a lack of stock. It is more the norm to build and hold, so the market isn’t very liquid.
And, with a relatively small number of operators in the market, the opportunity to grow is currently limited. Finding suitable land, particularly with planning, is hard, and when coupled with high inflation and rising interest rates, it makes development generally difficult.
But the challenges aren’t insurmountable, as the sector's continuing growth indicates.
4. Future trends: Size matters
A focus on quality is important for the market moving forward, something which is easier to deliver with new stock rather than refurbishing older developments. Delivering a variety of home sizes will give choice and different points of entry.
One-bedroom properties are the most cost-effective for those looking for affordability. But two-bedroom and two-bedroom plus properties are attractive to those with a bigger budget looking for more space.
For some, retirement doesn’t necessarily mean completely giving up work and having study or workspace can be desirable. With the addition of the communal facilities within the developments it enable residents to indulge or take up a new hobby for example.
With a limited number of operators in the market, there is an opportunity for brands within the build-to-rent (BTR) sector to expand into senior living. Given the rising numbers choosing to rent a home rather than buy, it could be a natural progression for residents.
To read our build-to-rent market trends: 4 takeaways from our Capitalise Living Conference, click here.
To find out more about our our Healthcare & Senior Living services, click here.
