Demand for new forms of retirement living is at an all-time high, driven by the UK’s rapidly ageing population.
The Office for Budget Responsibility forecasts that by 2065, more than a quarter of the population in England and Wales will be over 65 years old – an 18% increase on today. It estimates that this will require an extra £20bn per year from the public purse from 2020 and put unsustainable pressure on existing housing options for the elderly.
As the needs of the UK’s population mature, so must their living options. Retirement villages that incorporate 24-hour care services are going to be in high demand.
A report entitled Village Life: independence, loneliness and quality of life in retirement villages with extra care, published this week by the International Longevity Centre, found that only 3.6% of residents in extra-care retirement villages felt a high degree of loneliness and that 97% felt safe where they lived.
“This is the biggest growth sector in the country by far,” says Nick Sanderson, chief executive of retirement village owner and operator Audley.
The international market suggests there is enormous potential in this model. Market penetration in the UK is less than 0.5%, compared with 14% in the US and 8% in Australia and New Zealand.
“Between 600,000 and 800,000 homes will be needed in the next five to 10 years,” says Sanderson.
For developers wanting to get a foot in the door, attention to detail is essential, and the offer needs to be compelling enough for people to leave their current home and downsize, he adds.
The choice of site is key, as residents prefer to stay close to their local area. New-age retirees also demand high-quality housing, offering cutting-edge design and flexible living space.
“They are not just accepting anything anymore, they watch Grand Designs now,” says Sanderson.
There has also been a shift away from the idea that people wind down when they get old.
“They are going to want more,” says Roger Black, creative director at PegasusLife, which has built a £1bn retirement village empire in the UK in just under two years. “The opportunity lies in recognising that the elderly are still consumers. They are worth more focus, but in the real estate space there have not been many who have recognised that.”
Unlike regular housing developments, retirement villages require a greater duty of care to tenants. But how much of this responsibility should be shouldered by the developer?
PegasusLife gets external care companies to provide the care in its villages. “We are not the providers, we are the facilitators,” says Black. “The care is not our responsibility per se, however, our offer and ethos is to be able to provide it.”
Incorporating these care services into schemes takes the strain off local services and can mean that developers are exempt from an affordable housing requirement.
Sanderson also estimates that the development of extra-care schemes has the potential to release an additional 100 homes into the wider housing market each year.
“The best macro-economic option is to build more of these environments, which frees up bed space,” says Black. “The current policy trend is that old people are encouraged to stay in their homes for too long, and then they end up in a care home. So, in terms of local authority expenditure, it is another huge opportunity.”
Black expects traditional housebuilders to enter the retirement villages market in due course, with Asian and US investors backing projects and UK institutions then following suit.
Alternative asset classes have proven to have enormous investment potential in recent years and specialist operational assets, such as student housing, have seen huge waves of investment – according to CBRE, there have already been £4bn of deals in the sector this year.
And Black is confident the retirement sector will outdo the current darling of the alternatives world: “This is going to make student housing look like chicken feed. This is a specialist space which requires specialist expertise. Anyone who thinks otherwise will be eaten by the market,” he says.
