Senior Housing: Investment Volume across Europe
In Spain, a country where life expectancy is among the highest in the world and c.20% of the total population is over 65 years old (and expected to further reach c. 27% by 2035) there is no doubt that investors in senior living will eventually reap their rewards. Along with student residences and build to rent (BTR) housing, investment in senior living is exceeding all expectations within the residential market and seems to have the most promising future ahead.
Investment in senior residences reached €4.0 Bn in Europe in H1 2021. This volume represents an increase of 38% above the average of the last five years, and reached a new peak in 2021, due to the large volume of deals, ongoing projects and the wide range of new and existing investors in the market. In Spain, senior residences are home to over 390,000 elderly people with c. 180,000 people employed in these centres, which translates into 0.4% of Spain’s GDP.
The investor profile for these deals is increasingly diverse and includes investment funds, pension funds, REITs, financial institutions and developers. The growing investor interest in this segment is mainly driven by the mismatch between supply and demand and the potential of the sector which has been translated into downward pressure on prime yields, which currently stand between 3.5% and 5% in prime locations across Europe.
There are three main typologies of senior living: senior living cohousing, which comprises an intentional community of private homes clustered around a shared space (ie. Dining spaces, fitness facilities and media centres). Then there is senior coliving, which offer the more traditional all-inclusive mentality, with services, benefits, and community aspects all incorporated in monthly rent, and finally, the senior living resort, a holiday village-style development near the sea (more aimed at foreigners).
From CG Capital Europe, we think the reasons behind the popularity of this asset class are both real estate-driven opportunities and the ease of finding professional managers who offer attractive returns. Other variables such as favorable climate conditions, food and the Health System also play a significant role at the time of attracting elderly people from abroad to an increasingly ageing country which currently has a shortage of supply.