According to Savills latest UK Senior Living report, Integrated Retirement Communities (“IRC’s”, often previously referred to as ‘housing with care’) have seen an abundance of investor interest over the last 18 months. The international real estate advisor confirms that over this time period £4.6 billion was committed to the UK senior living sector, with the vast majority, circa 85%, of that placed into the Integrated Retirement Community sub-sector. The appeal of IRC’s for residents and the significant scope for growth is beginning to be acknowledged, with Savills noting that IRC’s may have reached a crucial inflection point, similar to that seen in the US market over a decade ago, right before a period of huge sector growth.
Caryn Donahue, head of senior housing transactions at Savills, comments: “Whilst Integrated Retirement Communities have been a product in the UK for some time, it is only more recently that they have started to capture the attention of large scale investors. As a result, other markets such as the US and Australia are around 20 years ahead of the UK in terms of the development of this sector.”
The ‘inflection point’ in the US market happened in 2013, when the total number of senior housing units passed the number of nursing home units and then continued to accelerate, whereas the latter has seen little growth over the past two decades. Currently in the UK, just 1% of those aged over 65 live in IRC’s, compared to 6.5% in the USA and 5.5% in Australia. Given that the number of over-65’s in the UK is projected to total over 15 million by 2030 (2.4 million more than today), it’s clear there is enormous scope for growth.
Caryn Donahue continues: “Over the last decade we have seen just 4,000 Integrated Retirement Communities developed annually. If we continue developing in the sector at the same pace, the provision rate would only increase from 1% today to 1.3% by 2030. This, coupled with the fact that the over 65’s population is set to increase by 300,000 people every year, underlines the substantial need for increased growth in the sector.”
Savills notes that, along with the recent growth in the sector, there has also been a diversification of the pool of active investors over a short period of time. In 2020 almost all acquisitions or commitments were by investment managers, whereas in 2021 the investor pool expanded, with pension funds, private equity and private investors accounting for a much larger proportion of investment into the sector.