Seniors Housing investment rising against challenging backdrop

The volume of capital targeting the UK Seniors Housing market has continued to grow so far in 2022. In the first nine months of the year, more than £2 billion was committed to the sector.

Rising investment volumes so far this year come despite the backdrop of geopolitical and economic uncertainty which include supply chain issues, a global energy crisis, high levels of inflation, and increases in build and operational costs.

It has become more challenging to borrow at similar loan to value and loan to cost levels, affecting funding for new developments. As investors adapt to these conditions, it may weigh on timescales for investment earmarked for Q4.

Investing in Seniors Housing

However, many investors are looking beyond the short-term. The case for investing in Seniors Housing remains, not least the fact that the UK has a significant and growing undersupply of age-appropriate housing for seniors, something we examine in more detail here.

Strong demand fundamentals are matched by the weight of money entering the residential sector. Illustrating this, some 25% of institutional investment in UK property so far this year was in residential, up from around 10% in 2012, and only behind offices and industrial.

Our Residential Investment Survey, which represents the views of 54 institutional investors that manage £76 billion in residential assets across the UK (including student and BTR) showed that while only 31% of respondents are currently active in the Seniors Housing sector, 67% expect to be active in five years’ time, the largest projected increase of any sector in the survey.

We expect to see yield compression for investors in the medium term driven by increased investment, the expansion of the sector, as well as maturing operational businesses. Investors who can deliver on strong development pipelines are likely to benefit from first mover advantage in the race to scale and optimised operating performance.