Nordics senior housing sector attracting investors’ interest
The Nordics’ senior housing sector is attracting considerable interest from foreign investors because of a combination of factors that make it unique, experts agreed at the Senior Living and Care in the Nordics in-depth seminar, organised by SHHA and Real Asset Media, which took place online yesterday.
“The supply/demand imbalance is getting worse, and this problem can only be addressed by private investors,” said Jonas Nolin, co-fund manager, investment director, head of Sweden, Northern Horizon. “We see really good opportunities for the private sector to step in.”
The increase in demand follows the same demographic changes visible in other European countries, as people live longer. What is unique to the Nordic countries is that they have a historically strong welfare system based on needs, rather than ability to pay, and local authorities are responsible for the sector.
“There are three reasons why we have seen such strong interest from investors,” said Charles Favard, managing director, head of EMEA real estate, private funds group, UBS Investment Bank. “First, demand is strong, which is not always the case for other asset classes like offices or logistics. Second, the market is clearly undersupplied so investors have the certainty the asset will be fully let. The third is the resilience of income, as the government is the ultimate guarantor of the rent. This is unique to the Nordics.”
In addition to the State guarantee, the investment proposition is made even more enticing by the fact that yields have moved up significantly and now the yield spread to government bonds is attractive.
“A defining characteristic of the Nordics is that social infrastructure is underpinned by the state”, said Clive Drury, Nordic lead, operational real estate, JLL Sweden. “The prospect of secure income over the long term is looked on favourably by investors. We’ll see private sector taking an increasing market share.”
If the business case for investors is clear, it is also the case that local authorities, given the massive increase in demand, need all the assistance they can get from private sector specialists.
“Care homes are costly to build, regulations are very strict and there has been an undersupply of beds for many years,” said Nolin. “Municipalities are wholly responsible for old age care, but they need help from the private sector to build the assets and cope with the demand.”
