There is something very unusual about the retirement home sector, delegates heard at Real Asset Media’s SHHA In-Depth: Best Practice From the UK – Integrated Retirement Communities webinar, which took place online recently.
“We welcome competition in this sector,” said Honor Barratt, chief executive, Birchgrove. “We need more operators and we need more activity to persuade institutional capital to invest. We don’t deliver as many units as we should.”
Competitors are actively invited to join in, because the sector has to grow and acquire visibility in order to attract the investment it needs to meet current and future demand.
“We encourage other companies to create more product,” said Nick Sanderson, CEO, Audley Group. “We need to create more to attract more, and it helps us if there’s more than one offering in the same location.”
The fundamentals work in the sector’s favour: supply is low and demand is set to grow, as demographic trends are clear and the baby boom generation is joining the seniors’ ranks.
“Need is only going to grow in the next 10 or 15 years,” said Sanderson. “In the UK and elsewhere, people want to maintain control of their lives as they age, but want to be able to get support when they need it.”
The way forward is cross-border cooperation, exchanging views and experiences and learning from best practice.
“We need to be part of a global conversation, because this trend is happening all over the world,” said Michael Voges, executive director, ARCO. “Demand for this type of product is high everywhere, and every development is oversubscribed. The need is such that it’s an imperative to get it right.”
Demand is high everywhere, but local markets and conditions are varied across Europe. France is a very mature and well-developed market, while Italy is a nascent one and requires a lot of upfront investment. Denmark and other Nordic countries offer opportunities, especially at the premium end of the market, because more affluent people are not satisfied with the state-provided retirement homes and want an alternative.
“We will see the integrated retirement community model develop in many more countries in the next few years,” said Voges.
The UK market is based on sales and the rental market is almost non-existent, although that is now changing. In Europe it is the other way around.
M&G Real Estate is one of not many institutional investors that have taken the plunge. “Having a single tenure rental focus model works very well for us,” said Freddie Wonnacott, director, fund management, M&G Real Estate. “It feels like a resi block of flats, with a different management style. It is easy to leave, but our buildings are full because people like living there.”
Retirement communities match the needs of the customer for care on demand, for flexibility, companionship and a sense of community, with the needs of investors for steady returns.
“So far we have focused on the UK and on the for sale market,” said Domas Karsokas, investment director, Octopus Real Estate. “But now we are actively seeking opportunities in Continental Europe and having discussions with operators there. The vast majority of retirement homes in Europe are for rental, while in the UK the vast majority is for sale, but the product itself is very similar.”
Author: Nicol Dynes
Source: Real Asset Insight