Senior Living

The UK senior living market is still in its infancy and the penetration rate is still low compared with other mature markets. Investors will be attracted to structural changes in demand and changes to the UK care system. The sector is unlikely to see yield compression until the sector begins to mature. We anticipate a slow start to 2024, followed by a steady increase in sales rates in the senior living market over the next 12 – 24 months.

Key Takeaways

1. Despite a slowdown in the housing market, demand for age-appropriate housing is rising. We anticipate that the sales velocity in the senior living market will begin to recover over the next 24 months.
2. With the success of existing rental product offerings, we anticipate an increase in appetite from investors in the sector. Affordability will be a key driver for the sector if more schemes are developed for a mid-market offering.
3. A key focus for operators and investors going forward will be on occupier need, particularly on providing community, care, and wellbeing across schemes, rather than the focus being on the real estate.
4. We anticipate more authorities will see senior housing more holistically in providing a wider social benefit and contributing to their housing needs.

Cautious optimism in the senior living market

Steady return in sales

The UK senior living market is still in its infancy and the penetration rate is a fraction of what is seen in other mature markets. According to the Housing Learning and Improvement Network (Housing LIN) most of the elderly in the UK are living in mortgage-free residential dwellings that traditionally are sold prior to moving into a retirement living unit. The increasing number of over 75s is driving demand for retirement housing. However, developers are currently targeting those with housing wealth over £500,000. This is further increasing the lack of supply in the mid-market. We anticipate a slow start to 2024, followed by a steady increase in sales rates in the senior living market over the next 12 – 24 months.  

Increased tenure flexibility  

Take up of rentals has grown substantially over the last five years, which in turn has attracted institutional and fund investors who are seeking to diversify their portfolios, into the market. Rental offerings may enable mid-market operators to develop in mid-affluent locations, where a for-sale model may not be viable. Affordability will be a key driver for the sector if more schemes are developed for a mid-market offering.

Figure 22: UK 65+ Population house price distribution

Source: CBRE Research

Government taskforce reporting in 2024

Commissioned in May 2023, the Government’s Older People’s Housing Taskforce is accelerating recommendations to stimulate growth and investment in the sector, particularly within the mid-market. While there will be a general election in 2024, it is hoped any new government will embrace the recommendations put forward. The focus of the taskforce will be on the consumers, the planning system, investment into the sector, and fiscal incentives.

Focus on urban development and amenities

Senior living developers are moving towards more central locations so seniors can be closer to public transport and amenities. In addition, there will be a new spotlight on tailoring the communal living space and services provided by the operators that complement the needs of seniors, focusing on the needs of the occupiers rather than purely on the real estate.  

Land

Senior living operators struggle to compete with the mainstream commercial and residential developers for land, which limits their ability to expand. At present, there is an inconsistency in how planning authorities view senior living developments, treating them as mainstream residential schemes rather than housing with care. We anticipate more authorities will see senior housing more holistically in providing a wider social benefit and contributing to their housing needs.