Competition in senior housing market heats up after covid

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The pandemic acted as an accelerator, with a lot of new capital streaming into the sector. By Nicol Dynes.

A lot of new capital is seeking to enter the senior accommodation market in Europe, but established participants have an advantage.

“The market has become very competitive because of new investors that entered during the pandemic,” says Nikolai Schmidt, head of transaction healthcare at Swiss Life Asset Managers. “We were pioneers, investing €2 billion in senior homes and assisted living since 2006, but we’re still expanding. It’s a strong market and we like the focus on the social aspect.”

The pandemic has acted as an accelerator, focusing investors’ attention on the importance of the sector and the opportunities it offers.

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“More investors are moving out of offices or resi and trying to get into the healthcare market, because they like the long leases and resilient assets,” says Jan-Bastian Knod, partner and head of healthcare advisory and residential advisory for capital markets at Cushman & Wakefield. “We see a significant increase in interest and demand, and more competition.”

Established markets

New participants tend to target the bigger, established and liquid markets, such as Germany and France, where it is possible to find portfolio deals, while established companies are seeking geographical diversification.

“We are pan-European, have €5 billion of assets in eight countries and are growing our portfolio,” says Raoul Thomassen, chief operating officer of Aedifica. “We have a €800 million pipeline and are ready to enter new markets, provided we can buy a portfolio and not just a couple of assets. We’ve just entered Ireland, because we see the opportunity to build scale.”

‘More investors are trying to get into the healthcare market, because they like the long leases and resilient assets.’

Jan-Bastian Knod, Cushman & Wakefield

Stability is one of the crucial factors for institutional investors, as they are making a long-term commitment to a country and don’t want to deal with sudden policy changes. The other is the presence of reliable operators with a good track record.

“France and Germany are the biggest markets, but all countries are undersupplied, so you can find opportunities everywhere, provided you have the right product and the right operator,” says Stephen Miles, executive director and head of operational real estate investment for Continental Europe at CBRE. “Once you have a footprint, you can use that expertise to expand.”

Market participants with an established footprint have the advantage of expertise and are better placed to find the best operators. “In Europe, unlike in the US, there aren’t many institutionalised operators, which is a challenge for the sector,” says Caryn Donahue, head of senior housing transactions at Savills. “That’s the biggest barrier across the continent.”

Widening footprints

“Many pension funds and insurance companies will try to widen their footprint in the sector and many operators will try to develop a platform,” says Knod.  “French operators now cover all European countries, which makes it interesting for institutional capital looking for core product, because it’s a guarantee of quality.”

As institutional capital comes in, developers will see the opportunity and bring more product to the market.

Germany and France are the biggest markets in Continental Europe, where investors can find the best opportunities of portfolio deals, but investors are casting their net wider.

“We focus on Germany and France, but we want diversification, so we are looking at Spain and Italy, where we see potential because of the shift from family care to professional care in specialised facilities,” says Schmidt.

‘France and Germany are the biggest markets, but all countries are undersupplied, so you can find opportunities everywhere.’

Stephen Miles, CBRE

Spain and Italy are interesting markets because of the demographics and the trend towards professional care in facilities, but there are challenges. “Southern Europe is lagging behind,” says Dietmar Zischg, partner at CMS Adonnino Ascoli & Cavasola Scamoni. “It’s easier to find product, but it may not be what you’re looking for. You have to choose your operator carefully and do your due diligence, because it’s very difficult for the owner to change operator.”

“Operators are beginning to cross borders and bring their expertise to countries like Spain and Italy,” says Donahue. “I see more consolidation happening in the market.”

Ticking all the boxes

Senior housing and healthcare are two sectors that tick all three ESG boxes for positive impact on the environment, society and governance.

“Until now, capital has focused on the E, the greening and energy efficiency of buildings, but now it’s looking at the social aspect, like in the US,” says Miles. “It’s all coming together, because people realise that you have to have the complete package.”

It has often been the other way round in the healthcare sector, with social impact coming first and the sustainability angle looked at later. “Healthcare is very focused on the S; the social impact is clear,” says Zischg. “We assist investors in setting up dedicated healthcare funds, but then usually work is needed on the E, because existing stock is not compliant. However, they find that capex improvements drive down service charges, so it’s a positive.”

A well-thought-out ESG strategy is now a must. This trend is being driven by investors and lenders more than regulators. Regulations also vary across European countries, so companies have to adapt and be proactive. “Sometimes we have to anticipate regulations, because we can’t wait,” says Thomassen. “But future-proofing our portfolio is crucial to us, because we are building for the next 30 years.”


European senior housing and healthcare are becoming less alternative and more mainstream as they attract more institutional capital that is keen to diversify.

There is a lot of choice for investors, as these asset classes have many sub-sectors they can choose to focus on. “There is no lack of demand from investors, but capital feels most comfortable with independent living,” says Miles. “There is huge scope for institutional capital to come in and expand that part of the market [by] providing the right types of accommodation so people can live independent lives for longer.”

‘In Europe, unlike in the US, there aren’t many institutionalised operators, which is a challenge for the sector. That’s the biggest barrier across the continent.’

Caryn Donahue, Savills

Hybrid schemes, which provide a combination of independent and assisted living, are becoming more popular in some European countries. “There’s a shift under way, from nursing homes to assisted living, because it’s less regulation intense and it needs fewer staff,” says Schmidt. “It is very difficult to find qualified staff to work in nursing homes.”

The US market, which is more mature, provides an idea of the next steps that need to be taken in Europe.

“In the US, the sector is much better understood by investors. Europe still has a long way to go,” says Donahue. “In the US, for example, there are clear definitions for the many sub-sectors, while in Europe, it’s difficult for entrants to know what is being talked about.”

Terminology is an issue that can deter entrants and confuse current participants. “If you want to attract institutional capital to the market, you have to make it easier for them. Naming conventions would be an important first step,” says Miles.