Senior living’s social impact appeal

An aging population is making senior living assets an increasingly attractive investment proposition, and a good play for capital with a social impact agenda, writes Christopher Marchant

There is a growing number of retirees and senior citizens the world over. An October 2021 World Health Organization report on aging and health estimates that by 2030, one in six people worldwide will be aged 60 years or over. In the UK, a 2021 government brief, Housing an ageing population, reported that in 2019, the 65-plus age group increased by 23 percent between 2009 and 2019, at a time when the whole UK population only increased by 7 percent.

The covid-19 pandemic has served as a reminder that society’s oldest members are also often the most vulnerable. And with an aging population in many Western markets, there is an urgent requirement for more housing that caters to the unique needs of this demographic.

Indeed, the pandemic has reinforced the view that quality housing for senior citizens should be a priority of governments. And from an investment perspective, capitalizing the endeavor can be a boon to any institution’s ESG credentials.

Olli Fischer and Carl-Adam von Schéele are investment directors at Nordic Real Estate Partners (NREP) with the remit of developing ‘future-proof’ senior housing, care homes and social infrastructure. NREP, the largest investment manager in the Nordics, has a strong ESG ethos, including committing to net zero by 2028. And the firm’s approach to the provision of senior housing is to ensure these assets, and their tenants, remain fully integrated into the wider community.

“Many active seniors don’t want to be isolated in a traditional senior housing facility,” explains Fischer. “They want to engage in a community, and they want to have meaningful activities and interactions with a lot of different people.

“So, NREP has developed a model for active seniors where their housing is mixed with families and younger people, so they become a valuable part of a community. These relationships with other people are extremely important for their health and well-being.”

“[Many seniors] want to engage in a community, and they want to have meaningful activities and interactions with a lot of different people”

Olli Fischer

Holistic approach

Basil Demeroutis is the managing partner of property investment and development firm FORE Partnership, which recently submitted plans for a sustainable integrated retirement community in Bristol, England, alongside operator partners Amicala. St Christopher’s Square aims to be one of the first net-zero communities in the UK, sitting on a five-acre site and providing 122 homes for seniors and a range of community benefits.

When creating senior living spaces, Demeroutis says ESG must be considered holistically. “There is a false division we have created in our industry. You can’t separate health and well-being from low-carbon solutions or governance and social. If you see them as interconnected, you can create an authentic place that people want to live and gather in.”

There are also very specific requirements for senior living spaces, which developers and investors must factor in to cater to the health and wellness needs of their tenants. This can range from increased provisions for mobility to increased capacity for ventilation.

These are considerations highlighted by Patrick Bone, real estate fund manager at Schroders Capital, which is creating a new retirement village in Southampton, England.

“We do have to be very careful to ensure we have all the correct mobility specifications in place,” says Bone. “Rooms must be a certain width, so that they can have wheelchair access. There are also walk-in showers. So, in terms of the design, a lot of consideration needs to go into the fact that some of the people living in these retirement apartments are often facing mobility issues.”

However, there is shortage of supply in many markets, the UK being a case in point. According to a February 2022 Savills report, UK Senior Living – the Inflection Point, just 1 percent of people aged over 65 in the UK live in integrated retirement communities (‘housing-with-care’), compared to approximately 6.5 percent in the US and 5.5 percent in Australia.

Andrew Fyfe is associate director within the BNP Paribas Real Estate healthcare and senior living team. He is also founder and chair of the Scottish Housing with Care Taskforce, a body established by retirement community operators, investors and local authorities to establish why Scotland, and the UK as a whole, is lagging behind comparable countries when it comes to providing housing-with-care.

“Historically, some funders have seen senior living as a real estate play and others as operational or care-related. As such, it can fall between two stools. For some, the term on which the debt would typically be offered would be too tight to build and sell all the apartments within [a development].”

However, this shortage also signals the future opportunity for capital and some are spotting it. “There are a number of funds targeting the sector,” notes Fyfe, highlighting the example of Cheyne Capital, which has just agreed to fund senior residence developers Lifestory.

“It’s important that the next generation of senior living continues to be in homes that are attractive, comfortable places to live”

Colin Rees-Smith
BNP Paribas Real Estate

Positive living

There is also something of a marketing exercise required to make these assets attractive to prospective tenants. As Colin Rees-Smith, a senior director at BNP Paribas Real Estate, observes, many older people are reluctant to move out of the family home and into housing-with-care facilities.

“So, it’s important that the next generation of senior living continues to be in homes that are attractive, comfortable places to live and, critically, part of the social fabric of the wider community. A positive living experience that tenants will embrace, not fear,” he says.

On this aspect, NREP’s Fischer points to his firm’s focus on providing communal areas to combat loneliness among seniors while Schroder’s Patrick Bone highlights that those senior citizens with a decreased sense of isolation make fewer calls to their doctor, reducing pressures on healthcare provisions in the wider community.

A current shortage of housing-for-care and senior living assets that appeal to a more discerning older demographic coupled with their desire to remain fully active citizens of the communities where they reside can inform investors of the type of developments most likely to provide performance in the years to come. It can also outline the opportunity to make a valuable social impact a part of their own sustainable investing journeys.