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‘No let-up in demand’ for senior housing in Europe

With low supply and demographics pointing to a growing number of elderly, the outlook is positive for senior housing and healthcare. By Nicol Dynes.

The senior housing and healthcare sector has proved its resilience and its potential during the pandemic, leading to increased demand and interest, experts told Real Asset Impact at the Senior Housing and Healthcare panel session at Expo Real in October.

“I’m very excited about the sector. Appetite did not diminish during the pandemic, because it is driven by macro factors,” said Stephen Miles, executive director, head of operational real estate investment, Continental Europe, at CBRE. “Investor volumes have held up better than other asset classes and there is no let-up in demand. The real problem now is supply.”


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Provision remains low across Europe. In the UK, senior living accounts for less than 4% of housing stock.

“We need a lot more product in senior housing and in healthcare,” said Nikolai Schmidt, managing director, transaction healthcare, at Swiss Life Asset Managers. “Now there is an incentive to build new facilities because investors are interested, they have seen how resilient this asset class has been during Covid-19.”

The entrance of new players is expected to accelerate the sector, lead to more investment in real estate development and go some way towards reducing the current supply/demand imbalance.

“Investors have realised that these facilities are critical and the market is large, so they are diversifying from offices or retail into the sector,” said Frédéric Dib, president of Mozaic Asset Management. “There’s clearly a lot of growth ahead for the sector to meet what is a real need in society.”

The demographics driver

On the demand side demographics is the key driver, as the baby boom generation will soon join the ranks of over-65s. By 2050 the number of people over 85 is forecast to have doubled.

The different aspects of hospitality are expected to grow in importance as senior housing becomes more of a residential product. Miles calls it “the hotelification process”, as more amenities and more services are on offer to meet residents’ demands.

Expo real senior housing panel (l-r): Nikolai Schmidt, Sabine Geuss, Frédéric Dib, Stephen Miles, Benjamin Cabanes, Charles-Antoine van Aelst, Ron van Bloois


The mixed-use trend in real estate extends into senior housing and healthcare to offer more flexibility to residents and investors alike.

“There is such a high demand for healthcare that new products are being developed,” said Sabine Geuss, senior fund manager, healthcare, at Principal Real Estate Europe. “We’ll have more diversified care facilities. On one side there’ll be activities for people, a chance to have coffee together, socialise and be part of the community, while on the other there will be medical centres and specialised clinics.”

“We see a shift to assisted living where residents can choose their accommodation, their meals, their services and amenities,” said Schmidt. “They want to stay in one place, so if their health deteriorates they can remain in the building and receive more assistance.”

There will be more choice across the spectrum of needs. “We hope to be supported by local regulations so we can create the new products the market demands,” said Geuss.

‘There is an incentive to build new facilities because investors are interested, they have seen how resilient this asset class has been during Covid-19.’

Nikolai Schmidt, Swiss Life Asset Managers

Having a pan-European strategy is still difficult as there are still differences in culture, market requirements and legislation. “You really need local expertise and a good relationship with operators because regulations vary so much from country to country and sometimes within a country,” added Geuss. “In Germany, for example, every federal State has its own regulations and there’s always the risk of change.”

Fragmented markets

It is good to share best practice and import models from other countries, but it doesn’t always work. “So far we’ve focused on France and Germany but we would like to expand to the Netherlands, the Nordics and Austria,” said Schmidt. “The problem is that they are very fragmented markets and each has its own regulations.”

Regulations can be a hindrance and a complication but when it comes to ESG and quality requirements it creates the right kind of competition, experts agreed. It actually helps to differentiate between companies, giving the best ones a competitive advantage.

“Regulation is not just part of our business but it’s also an opportunity,” said Dib. “It creates liquidity and consolidation, pushing bad players out of the market and allowing new entrants. It has also helped operators improve and become more professional.”

There is a definite shift to quality which will benefit the sector. “The institutional capital we work with is targeting best-in-class operators,” said Miles. “Reputational risk is a real concern in this sector so operational excellence is a pre-requisite and it’s pushing out the lower part of the market and pulling quality standards up.”

The focus on ESG is improving the quality of real estate and of the operational side as well. “There’s an increasing differentiation in the market between buildings and between players, whether they are ESG-compliant or not,” said Charles-Antoine van Aelst, chief investment officer at Aedifica. “Over time there’ll be a benefit on the valuation side as well. But it’s already a win-win situation”.

‘You really need local expertise and a good relationship with operators because regulations vary so much from country to country.’

Sabine Geuss, Principal Real Estate Europe

Stricter regulations and the lessons learnt during the pandemic are leading to improvements and upgrades which are positive for residents as well as staff.

“The operational side has been suffering and it will take time to recover from several waves of Covid-19 that had dramatic consequences,” said Benjamin Cabanes, director real estate, at Korian. “But we’ve been improving our portfolio to make it easier to recruit staff. We need to be more attractive as an employer, so we are investing massively in human resources and in our buildings.”

Recruiting staff has become a problem for the sector. Companies like Korian are looking abroad but also targeting the young with apprenticeships and improving working conditions for everyone.

“Technology helps in many ways, but dealing with elderly people is a people business, it really needs human interaction, which is why the availability of qualified staff is such a critical issue,” said Schmidt. “It has become the biggest challenge for the sector.”


Aedifica goes for growth and diversification

Growth and diversification are the keywords for Aedifica, one of Europe’s pioneers in the senior housing and healthcare sector. The pure play healthcare REIT started in 2006 as a small player in Belgium, but is now active in seven countries.

“Good partnerships have been the key to our expansion,” Aedifica’s chief investment officer, Charles-Antoine van Aelst, told Real Asset Impact. “We’ve followed our operating partners and we’ve become more international.”

The group has a €855 million development pipeline to build new assets and to refurbish and future-proof existing buildings and its strategy is to accelerate growth across Europe based on development and acquisitions.

“We have an M&A strategy,” says van Aelst. “In the UK we did a large portfolio acquisition and in the Nordics we bought a big local player. Now Germany has overtaken Belgium as our biggest market, which makes sense given the size and potential of the market.”

New asset classes

The next step is diversification within healthcare and beyond. “We already have a presence in senior housing, assisted living and specialist care homes but we want to expand to new asset classes like clinics which are not in our portfolio yet,” he says. “We’re also looking at new segments like children’s day care in the Nordics, which is a very interesting market.”

The diversification strategy extends to operators as well. “We continue to cooperate with the big international operators we have grown up with, but we also like to work with local heroes, as we call them, small players with a good track record and knowledge of the local market.”

‘We already have a presence in senior housing, assisted living and specialist care homes but we want to expand to new asset classes like clinics which are not in our portfolio yet.’

Charles-Antoine van Aelst, Aedifica

Aedifica has a portfolio of more than 550 buildings and works with over 100 operating groups. “The main drivers of future expansion will be demographics, of course, the potential for consolidation of the market and the healthcare financing system,” says van Aelst. “There are also local specificities to take into account. There’s a lot of potential in Southern Europe, for example, but the financing of the system is less clear.”

The main issues in the market are increasing competition from both investors and operators, continuing yield compression, inflation and the interest rate outlook, he adds. Sustainability and energy efficiency are also hot topics, along with a discussion on shorter leases and on the adaptability of buildings, which has come to the fore during the pandemic when the demand for single rooms shot up.

The market is growing and still offers great opportunities. “The main feature of healthcare is the strong lease terms, it’s all about long-term sustainability rather than quick profits,” says van Aelst.

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