New opportunities in senior living sector

Park bike

With many rich countries across the world seeing their populations age at a rapid rate, investors have long been looking at senior living as a sector with strong long-term fundamentals.

The difference in 2021 however is the expectation of those consumers that are 65 plus are different to those that came before – that means investors, designers, developers and brands having to take a different approach.

According to investment advisory firm JLL Capital Markets, alternative property sectors such as senior living were bright spots for the commercial real estate industry, bringing in more than $47.9 billion in transaction volume in the United States alone.

Covid-19 complicated matters in that it’s a condition that disproportionately affects the elderly. There were plenty of stories of the virus ripping through care homes and while this may have made things difficult for investors in the short term, the future still looks good.

In the UK the population of over 75s is set to increase by 56% over the next 20 years and research by Cushman & Wakefield suggests that their projected combined housing wealth is expected to reach £2.4 trillion by 2040.

The first baby boomers turn 75 this year at that generation is where a lot of the demand for senior living is going to come from. They have money to spend and have a different level of expectation to those that came before.

“Populations are changing rapidly with more old people, which will require a response in the coming years,” James Kingdom, JLL Living Capital Markets research director, said. “From the UK and Germany to Japan, it’s the defining issue of our time.”

The big challenge in this sector remains the range of options needed for different requirements. Those at the younger end of the age range may value community and accessibility to leisure and retail activities, while those who are older might need more direct medical assistance.

“A wider range of age specific options are needed, from retirement villages for growing active elderly populations with only minor conditions to later living which relieves pressure on the healthcare sector,” Kingdom said. “For investors and operators, more choice is also a way to diversify income.”

Hospitality Crossover

It’s not just investment in senior living real estate itself that is gaining more and more attention in the investor community, there are also examples of brands and developers in the hospitality space itself looking to incorporate some aspects into their projects.

Florian Sonigo, who previously worked at Hyatt, is the founder of Opalia Hotels and Residences a concept that he is looking to get off the ground, initially in Portugal.

Sonigo wants to marry serviced apartments for shorter stays together with build-to-rent residences and is aiming at both the millennial and senior living market. This hybrid approach to hospitality will centre around health and wellness, the natural world and community all put together in a slick digital package. 

“We wanted to have this intergenerational product not only focusing on seniors but as well trying to bring different generations in – mainly millennials,” Sonigo told Hospitality Insights.

The offering won’t be explicitly medical, rather it will be build around a holistic centre for preventative care.

“What we wanted to do is to democratise this environment for people to grow old and we wanted people who are retired to have a second way of living,” Sonigo said.

There’s not a single path to investing or developing properties focussed on seniors, Sonigo’s high-concept Opalia is one route but there are others. Some could also be especially advantageous in the current unpredictable climate.

"Senior living and hotels have quite different metrics, from an investor's perspective, and behave very differently,” Jean-François Garneau, chief development officer and founder of Initial Real Estate, a strategic planning and development services company, said.

“But in this fluid and challenged period for hospitality, investors may seek existing properties that tick the right location boxes, have a history of known operating costs, and an infrastructure that can be smartly and lightly re-designed and retrofitted into a new and stable asset.”

Converting assets from other real estate segments might be the name of the game for the moment but with ageing demographics across Europe, North America and Asia, developing new types of accommodation will be necessary.

Insight Comment
2020 was a tough year for the care home industry with Covid-19 raging. However, with an ageing population in many rich countries, the needs of the elderly are going to have to be met. This next generation of pensioners are also going to want something different with a focus on health, wellbeing and community.