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‘Senior living attracting record investment’

Investors have recognised that senior living secures long-term income opportunities and are putting record amounts of capital in the sector, delegates heard at Real Asset Media’s Senior Housing & Healthcare Investment Briefing, which was held in London recently.

‘This year so far over €700 mln have been invested in senior living in the UK and Europe, which is a record high sum,’ said Lydia Brissy, Director, European Research, Savills. ‘It shows that investors’ appetite is growing’.

Lydia Brissy, Director, European Research, Savills

‘This year so far over €700 mln have been invested in senior living in the UK and Europe, which is a record high sum,’ said Lydia Brissy, Director, European Research, Savills. ‘It shows that investors’ appetite is growing’.

Senior living is still in its infancy in mainland Europe and most investment has come from local players. However US investors, who have already made inroads in student housing and multi-family residential, are now looking at senior housing as well.

On the positive side, the sector offers a huge growth potential. ‘The demographic drivers are clear, as most countries in Europe have ageing populations, which creates a need for a variety of purpose-built housing, and therefore opportunities for private initiatives to supply housing that meets these needs,’ she said.

Other positive aspects of senior living for investors is that it is an undersupplied market, it helps with portfolio diversification and, crucially, it is less cyclical than most other sectors and offers a secure, long-term income stream.

On the negative side, the sector remains opaque, Brissy said. This lack of transparency has limited cross-border investments into senior housing to just 30% of the European total on average over the past five years, compared to 62% for student housing.

Another obstacle is the differences in culture and regulation, she said: ‘Operating effectively in this sector requires strong knowledge of regulations and a good understanding of the family culture and attitudes of the elderly population, which can be very different from one European country to another’.

The sector is backed by strong fundamentals and ‘is bound to expand in the next decade and beyond’, said Brissy, but ‘increasing investor appetite has begun to put downward pressure on prime yields. However, it remains competitive compared to standard residential assets or commercial real estate’.

According to Savills research, the yield discount that senior housing offers over other asset classes ranges between 100 bps over prime multi-family and 66 bps over prime CBD offices. The prime senior housing yield currently ranges between 3.5% and 5% for direct-let, depending on the country, location and quality of the asset. 

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