Golden age

Investment in senior living properties is set to increase, particularly in the mid- to high-end segments. Aging populations, growing wealth and lack of supply are driving demand and investor appetite. By Paul Allen

Many retirement complexes combine the security of self-contained apartments with care facilities, so residents can stay onsite for minor medical treatment, notes Samantha Rowland, head of UK Senior Living at international property agent Savills. “And being in a community  prevents social isolation,” she adds.

In the UK – which with France has accounted for 68 percent of European senior housing investment volume over the past five years – upscale senior living communities are focused on rural retirement villages, typically with a hundred-plus ownership-based units. Pricing tends to be at a 10 percent to 15 percent premium to the residential market, depending on location and facilities, according to Rowland.

The UK market features a blend of ownership and rental models

At Audley Villages, each house, cottage or apartment is sold with a lease of up to 250 years. A centrepiece building contains a restaurant and bistro, library, swimming pool, gym, fitness classes and beauty treatments. Richmond Villages similarly offers self-contained apartments, bungalows and cottages in maintained grounds, with a small care home onsite. Several feature wellness spas. Most are resident-owned, but a selection are available to rent. The Auriens Dovehouse Street complex in London’s Chelsea is another scheme with a rental model, Rowland says. “So we are seeing more rental product take-up in the UK.” 

While much of the UK’s housing in care villages caters to affluent retirees, the number of mid-market independent living developments from the likes of ExtraCare Charitable Trust, Notting Hill Genesis and Anchor Hanover is growing. For instance, Anchor Hanover, England’s largest not-for-profit senior housing and care provider, now offers affordable rental housing options at more than 1,100 locations across the country. 

“The tendency in the UK is to establish mid-priced residences in small cities/towns, where affluent people live and can afford to buy senior living accommodation,” notes Yuri Dobrovolskyi, head of the Senior Living Unit at BONARD, a market intelligence and advisory firm specialising in senior living and rented residential asset classes

Institutional investors want to diversify their real estate portfolios, and senior living is certainly part of that investment thesis.
Marcus Roberts, Head of Europe – Operational Capital Markets, Savills

Continental models reflect local conditions

“In continental Europe, mid-priced residences tend to be located outside big city centres due to the high price of land and convertible buildings,” says Dobrovolskyi. “There are also a lot of non-profit residences, rather than private commercial companies, in small cities and towns.”

The predominantly rental mid-segment residences usually offer one- or two-bedroom, fully furnished and equipped apartments, in the range of 30–40 square metres for a one-bed apartment and 40–50 square metres for two, adds Dobrovolskyi. “Common amenities include a communal garden, entertainment area, parking, a laundry room and 24/7 emergency assistance. Medical services are not included in the rent, though.”

In France, senior complexes focus on hospitality-oriented rental apartments of 100 to 150 units in urban locations with good connectivity to city centres, says Marcus Roberts, Savills’ head of Europe Operational Capital Markets. “Many operators are now looking at taking that business model on a pan-European journey.” In Germany, the high-end senior apartment segment is relatively small, but the supply/demand imbalance presents growth opportunities.

Retirement complexes are increasingly being seen as an investment product

A survey by developer Pantera AG found 54 percent of German residents can imagine moving into a serviced apartment in later life. “We have a wealthy generation of retirees,” says Heike Piasecki, head of residential and serviced properties at consulting firm Bulwiengesa AG. “There’s definitely room for more accommodation options in the high-end serviced apartment segment.”

According to Michael Held, managing director of Terragon AG, a Berlin-based developer specialising in senior housing, Germany has around 30,000 premium serviced units. He believes 80,000 to 90,000 more are required. Terragon’s residential complexes are targeted at seniors who want to maintain an independent lifestyle. A restaurant and wellness/fitness area come as standard. Investors are taking note. “Residential complexes are increasingly popular as an investment product,” says Felix von Braun, managing director of senior housing provider DPF AG, who observes that most high-priced operators no longer own the actual properties. Savills research shows prime senior housing yields range from 3.5 percent to 5 percent for direct-let properties, with public REITs, insurance companies, pension funds, investment managers and developers increasingly active in the sector.

By Paul Allen

Title image: Terragon AG

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