Is there investment potential in the UK senior living market?

I’ve recently come across several reports highlighting the huge investment potential in the senior living property market. One of them, PwC’s Emerging Trends in Real Estate 2019 Report, says that investing in senior housing is one of the best bets for real estate investment and development for 2019 and 2020. 

For those unfamiliar with the senior living sector, built accommodation designed for and lived in by older people, typically 55+, tends to take one of two forms, housing with support and housing with care. Housing with support, often termed senior living communities, allows people to live mostly independently with access to a variety of amenities. It is this type of housing where there is huge potential right now. 

Right now in the UK the current supply of senior living homes is dwarfed by the rate at which the population is aging. By 2030 1 in 5 people will be over 65 and by 2070 there will be 9 million over 65s yet according to Savills only about 8,000 senior living units were built last year.

A report from Legal & General says that in the UK, retirees have assets worth about £1 trillion and 3 million people are actively looking to downsize from their current home. They estimate that there is a need for 3 million senior living properties to house the number of people aged over 65 that would consider downsizing.

So demand is very high, and particularly for properties where people can ‘age in place’. The ability to remain independent but not having to run a large family home is what many seniors are looking for. They don’t want to compromise on comfort or quality of life meaning demand for property in the mid to upper tier is most in demand. 

And looking to future demand, Knight Frank forecasts that in just 4 years, in 2023, the total value of the private senior living market will increase 40% to £55.2bn, up from £39.6bn this year. You can see why I find the investment case for senior living accommodation compelling.

However looking at the current pipeline of new developments it seems that many investors haven’t bought into the sector yet. This could be due to a variety of reasons, including that in recent years investors with a commercial focus have been making good returns without needing to expand into other sectors. They may even be reluctant to expand into the senior living sector, which typically comes with more operational complexity than other sectors. 

There are of course some that are making big investments in the market. Legal & General have the biggest programme I am currently aware of with a multi-billion pound investment programme planning to build 3,000 senior living homes in city centres across the UK over the next five years. Building such homes in city centres not only means occupants will have easy access to amenities and social scenes but will also help to revitalise high streets which anyone who keeps an eye on the news will know are not in a good state. 

Aside from the current high demand, one of the major benefits I see in investing in senior living properties is the resiliency of the sector. While all property types have their own business cycle, waning demand is less of a problem for senior living properties as the market is far less affected by the rise and fall in employment or the economy. This is particularly true now and in the years to come, as it is the wealthy baby boomers that are looking to enter the market. 

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