UK: A report from Knight Frank says annual investment in the retirement housing market could reach £3 billion by the end of the year, up 50 per cent on 2021.
Launching its Seniors Housing Annual Review, the company said that in the first nine months of the year, £2 billion had already been committed to the sector. Based on the pipeline of deals and projects under offer or on the market, it expects an additional £1 billion to be deployed in the sector before the end of the year, representing a 50 per cent increase in investment year-on-year.
Tom Scaife, head of seniors housing at Knight Frank, said: “Capital has recognised the market opportunity of seniors housing, and investment into the sector is coming from a wide variety of sources including UK pension funds, investment managers, private equity and private capital. The last two years have also seen significant growth in the amount of North American money entering the market.”
Knight Frank’s latest residential investment survey, which represents the views of 54 institutional investors with a collective £76 billion in residential assets across the UK – including PBSA and BTR – revealed that while only 31 per cent of respondents were active in the later living sector, 67 per cent expect to be in five years’ time.
“In real terms – and considering our expectation that the total number of specialist seniors housing units in the UK will grow by eight per cent, or around 63,000 units over the next five years – this would mean there would be 119 seniors housing units per 1,000 individuals aged 75 by 2026. This is down from 124 currently and from 137 back in 2012, underscoring the potential for significant growth in the sector to provide enough age-appropriate housing for the demographic shift taking place,” the report said.
Oliver Knight, head of residential development research at Knight Frank, said: “Rising investment volumes come despite headwinds which are impacting all real estate sectors. A backdrop of rising interest rates, high inflation and increased build and operational costs mean investors are more cautious, particularly those who are reliant on debt to fund purchases or development.”
The report highlighted rental as a growing area of the market. “From an investor perspective, mixed tenure schemes widen the accessible market and help accelerate absorption rates, whilst also reducing voids,” the report said.
Knight Frank forecasts the number of private rental units to rise 114 per cent in the next five years, from more than 5,000 to over 10,500 by 2025. “Even accounting for such rapid growth, senior housing rental stock will only account for just 1.3% of the total number of specialist senior housing options,” it said.
