• Real Estate Trends: Senior Living

    February, 2024

Due to the increase in the average life expectancy of the population, particularly in Spain, Senior Living is gaining considerable attention among real estate-focused funds and private equities due to the opportunities it offers within the sector.

Also known as Independent Living, it represents a subsector within the Living category aimed at meeting the needs of independent older individuals without continuous medical requirements. This housing type addresses the growing demand resulting from demographic ageing and the increased purchasing power of retirees seeking to move to more comfortable or smaller residences after their sons have become independent.

The market supplies to local retirees looking to relocate near their original homes, either by renting or selling, as well as international retirees attracted by favorable climates. Senior Living residences offer a wide range of amenities and services designed for a hassle-free lifestyle, including cleaning, recreational activities, 24-hour security, among others.

The business model for these residences can involve sales, rentals, or rights of use, offering financial flexibility to residents. This flexibility is crucial as the cost of service poses a significant barrier to generalized adoption. Despite its current limited presence in Spain, exponential growth is anticipated in the coming years, leading to a multiplication of available beds.

Presently, there are only 50 Senior Living assets with a total of 3,785 residential units, primarily located in Madrid (13 assets with 1,266 units), Barcelona (11 assets with 626 units), and Alicante (7 assets with 943 units). Looking ahead to developments in 2024, Malaga will have 4 assets with 1,694 residential units, followed by Madrid with 4 assets and 562 residential units.

Regarding prevailing business models, three stand out:

  1. Long-stay rental model: The primary business model involves generating rental income from seniors, ranging from €1,500/month to over €6,000/month, depending on the asset and its location.
  2. Short and medium-stay rental model: Highly sought after by international seniors who wish to experience life in Spain before committing to long-term renting or property purchase.
  3. Sale of lifetime usufruct: In this model, seniors pay an amount to enjoy the property for as long as possible. After this period, the owner regains usufruct of the property.