Credit: Joice Huys / UnsplashIs the Senior Living Market Set for a Real Estate Boom?
How Senior Living Players Are Responding to the Pos-pandemic Scenario
April 13, 2022Real Estate
The GRI Global Committee's kickoff session on Senior Living took place on March 30th – “Growth Sector and Investments: What to learn with different regions from the globe?”. The meeting gathered C-Level real estate investors, asset owners, operators, and developers.
*Disclaimer: While this review highlights the most relevant topics under discussion, it does not contemplate the full discussion between the Board and all Members. In addition, committee sessions also dedicate time for networking.
Important Takeaways:
• Big demand is coming with the baby boomers’ generation;
• It is necessary to reconstruct the operating model;
• Attainability with amenities is key;
• A lack of experienced operators in the sector is one of the main challenges;
• Better staff training systems could be one big step into a mature market
As the 2020 health crisis puts the senior living sector under extreme operational pressure, it seems that the investment demand for this asset class has now increased considerably. Global research shows that senior housing now represents 21% of investor's interest against 8% for Primary Healthcare, and 2% for Secondary Healthcare.¹ While the price per bed for nursing homes increased by nearly 22% in the first quarter of 2021, senior housing and nursing care transaction volume was up 61% in Q4 2021.²
Developers identify a great challenge in reconstructing the operating model to reduce its prices and rents. It may provide scalable attractive returns if it just covers a broader sector of the senior population, of which only 25 to 30% is currently able to afford the retirement models, at least in the US. Moving from the full-service retirement model into an à la carte product could be a potential solution for the middle-income range.
In regard to that, other managers actually recognize the US senior market as an opportunity to bring to light some new ways on how to design senior living buildings. European players likewise believe that attainability has become a key focus in the senior housing industry.
The most important question leaders may ask themselves is whether senior people are likely to stay on the property. A major concern discussed was whether a building could support a transition, at some later point, to assisted living.
In this sense, developers value amenities as the core business. Amenities are, more than anything, responsible for creating an environment where people want to spend time socializing. Therefore, amenities must be in the heart of the building and the product itself when it comes to senior housing design. The importance of creating walkable outdoor spaces was mentioned as key.
For some European countries (France, Germany, and Netherlands), operators mentioned a co-living driven business model that may fit better in smaller towns, being very different from tradicional assisted living buildings that exist in major European cities.
Some urgent hurdles relate to the fact that no standard business model seems to exist. It is expected that over the next five years professional operators would be able to manage projects on a more institutional scale.
As a regard to that, a lack of experienced operators in the sector rules as a key challenge all over the world. Recruitment expectations will still be limited until a more solid career progression in the market is made. A possible solution would be creating initiatives that make young professionals engage with a promising career, through university programs and internship opportunities that prepare them for complexities of senior operations.
In spite of its incipient stage in senior housing, India may represent a mature market over a medium period of time, as care homes are already in great demand, alongside with a cultural strength in operational efficiency.
Delivering standard and good service is directed related to staffing issues and it might have its initial push with the creation of complex and engaging training systems. The recruiting process should also meet very precise and analytical processes in order to gather the most suitable staff members for each company’s culture.
Session Highlights
*Disclaimer: While this review highlights the most relevant topics under discussion, it does not contemplate the full discussion between the Board and all Members. In addition, committee sessions also dedicate time for networking.
Important Takeaways:
• Big demand is coming with the baby boomers’ generation;
• It is necessary to reconstruct the operating model;
• Attainability with amenities is key;
• A lack of experienced operators in the sector is one of the main challenges;
• Better staff training systems could be one big step into a mature market
As the 2020 health crisis puts the senior living sector under extreme operational pressure, it seems that the investment demand for this asset class has now increased considerably. Global research shows that senior housing now represents 21% of investor's interest against 8% for Primary Healthcare, and 2% for Secondary Healthcare.¹ While the price per bed for nursing homes increased by nearly 22% in the first quarter of 2021, senior housing and nursing care transaction volume was up 61% in Q4 2021.²
Developers identify a great challenge in reconstructing the operating model to reduce its prices and rents. It may provide scalable attractive returns if it just covers a broader sector of the senior population, of which only 25 to 30% is currently able to afford the retirement models, at least in the US. Moving from the full-service retirement model into an à la carte product could be a potential solution for the middle-income range.
In regard to that, other managers actually recognize the US senior market as an opportunity to bring to light some new ways on how to design senior living buildings. European players likewise believe that attainability has become a key focus in the senior housing industry.
The most important question leaders may ask themselves is whether senior people are likely to stay on the property. A major concern discussed was whether a building could support a transition, at some later point, to assisted living.
In this sense, developers value amenities as the core business. Amenities are, more than anything, responsible for creating an environment where people want to spend time socializing. Therefore, amenities must be in the heart of the building and the product itself when it comes to senior housing design. The importance of creating walkable outdoor spaces was mentioned as key.
For some European countries (France, Germany, and Netherlands), operators mentioned a co-living driven business model that may fit better in smaller towns, being very different from tradicional assisted living buildings that exist in major European cities.
Check out our Co-living Global Committee events
Even though investors still find a higher demand in the youth level compared to standard residential living, they remain positive about the increasing interest and demand for professionalism in senior housing. Compared to years before the pandemic, more cautions around building medicalized environments have been urgent. The sector has more than ever shifted towards residential concepts that embrace independent ways of living with special facilities that, for example, also enable someone to self-isolate during challenging moments. Some urgent hurdles relate to the fact that no standard business model seems to exist. It is expected that over the next five years professional operators would be able to manage projects on a more institutional scale.
As a regard to that, a lack of experienced operators in the sector rules as a key challenge all over the world. Recruitment expectations will still be limited until a more solid career progression in the market is made. A possible solution would be creating initiatives that make young professionals engage with a promising career, through university programs and internship opportunities that prepare them for complexities of senior operations.
In spite of its incipient stage in senior housing, India may represent a mature market over a medium period of time, as care homes are already in great demand, alongside with a cultural strength in operational efficiency.
Delivering standard and good service is directed related to staffing issues and it might have its initial push with the creation of complex and engaging training systems. The recruiting process should also meet very precise and analytical processes in order to gather the most suitable staff members for each company’s culture.
Session Highlights
Watch the full discussion
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(¹) Senior Living & Healthcare - A Growth Market | May 2021
https://www.colliers.com/en-xe/research/202106-senior-living-and-healthcare-a-growth-market-may-2021
(²) Seniors Housing & Care Investor Survey and Trends Outlook
https://www.us.jll.com/en/trends-and-insights/research/seniors-housing-care-investor-survey-and-trend-outlook
https://www.colliers.com/en-xe/research/202106-senior-living-and-healthcare-a-growth-market-may-2021
(²) Seniors Housing & Care Investor Survey and Trends Outlook
https://www.us.jll.com/en/trends-and-insights/research/seniors-housing-care-investor-survey-and-trend-outlook
