Thought of the Week

Is it the supply side that’s letting the senior living market down?

March 21, 2024 4 Minute Read

By Jen Siebrits Alice Marwick

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In 10 years, the number of over 65s will have increased by 2.2 million people and will account for more than 22% of the UK’s population. This potential demand pool for age-appropriate housing has prompted investors to take note. Indeed, 38% of respondents to CBRE’s European Investor Intentions Survey want to pursue senior living in 2024. Still, despite the compelling demand dynamics, supply is lacking. We estimate there is an undersupply of more than 600,000 senior living units in the UK, with the main gap in the mid-market segment.

CBRE’s recent Senior Living Survey found health concerns and more manageable space were the primary reasons respondents aged 65-74 would consider downsizing. However, overall cost and value for money was a key concern to 54% of all respondents. The average entry level price of a senior living home is around £300,000, yet only 30% of over 65s own a home of this value, effectively excluding 70% of retirees from the market. 

The high costs in part reflect the amenity offer, and while 24-hour warden support maybe a non-negotiable, other amenities such as swimming pools and gyms may be unnecessarily pushing the price out of reach for many. It is imperative for operators and investors to understand and find a balance between service, amenities, and price points, that is suitable for the location and target market.

For some, the operational expenses and event fees may price out purchasers, and so investors and operators should look at rental and affordable retirement living models. In the overall residential market, the growth of older renters has outpaced wider trends; since 2010/11 the number of over 55s households has grown by 20%, but the number of over 55s in the private rented sector has grown by a much higher 70%. In line with this, take up of senior living rentals has grown substantially over the last five years. Positively this is attracting investors and the resulting rental offerings may enable mid-market operators to develop in mid-affluent locations, where a for-sale model may not be feasible.

It is clear that a one size fits all approach does not cater to the different care needs and budgets. The biggest demand pool is in the mid-market segment, which is currently not adequately catered for. Recommendations on how to stimulate growth and investment in the senior living sector are being drawn by the Government’s Older People’s Housing Taskforce. The focus of the taskforce will be on the consumers, the planning system, investment into the sector, and fiscal incentives. But it is clear we need to find a way to deliver financially accessible mid-market owner and rental senior living options.

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