Housing with care operators to drive rental market, research suggests

Tom Scaife, head of senior living at Knight Frank

The number of private senior living rental properties in the UK is forecast to increase by 160% in next five years, from almost 5,000 to more than 13,000.

Growth will be driven by a rise in the number of housing with care operators allocating a proportion of their pipeline to the rental market, according to research by property consultancy Knight Frank.

Despite the predicted growth, senior housing rental stock will only account for 3% of the total number of private homes for older people.

Its Senior Living Annual Review 2020 said dynamics in the market were changing, driven by investors and demand from tenants for flexibility, which included being able to delay the sale of the family home and quicker access to services and care.

The report said: ‘We expect to see a rise in take-up of the “one move solution” with increasing service and care being delivered into rental propositions. A rental apartment or care suite can provide increased tenant choice best suited to financial profiles and preference.’

Knight Frank’s deal tracker suggests 2020 will see £1.5bn of institutional investment into the UK senior living market, with investors ‘increasingly recognising the potential for growth in the sector’.

It said: ‘There is a move toward providing more choice for residents including through mixed-tenure and rental-only options and more schemes with varying facilities and services, from retirement housing designed with the downsizer in mind, through to housing with care schemes which provide high levels of services, care and support as an integral part of their proposition.’

Based on analysis of pipeline data, the consultancy anticipates 48% growth in the number of housing with care units over the next five years. The retirement housing market, which accounts for 658,000 units is forecast to grow by 10% over the same time, taking total seniors housing stock to more than 800,000 by 2024.

‘However, the rate of delivery is still dwarfed by the UK’s ageing population,’ the report said. ‘It means that, even though total delivery is forecast to continue to rise, in real terms the number of seniors housing units per 1,000 individuals aged 75-plus is expected to drop to 120 by 2024, down from 137 in 2010 and 129 currently.’

Tom Scaife, head of seniors housing at Knight Frank, said: ‘The investment case remains an extremely compelling one, with the market being driven by demographic changes, seniors’ property wealth, and a weight of capital seeking diversification.

‘With so much activity taking place in the senior housing sector this year, it’s no wonder we’ve witnessed a bumper year for investment.’

Michael Voges, ARCO executive director, added: ‘This year our members have reported a sharp increase in demand for retirement communities – particularly in the mid-market. This trend only accelerated during the coronavirus crisis as more older people have sought good quality housing, support, the security of access to care if they need it, and to be closer to community.

‘We are seeing increasing interest in our sector across the board – politically, from new operators entering the market, from investors and from older people’s advocates. We are confident that if the government implements much needed reforms we will see very significant increases in supply in the coming years.’

In terms of delivery, there is every chance 2020 could see a record low number of new retirement housing sites coming to market for more than half a century.