Retirement and Healthcare: An Introduction
Thursday 29th November 2018, Savills, London W1
Real estate for an ageing population
The UK’s population is set to grow by 10% over the next 20 years, but the number of those over 60 will increase even more as baby boomers come into this age bracket, explained James Purvis, Associate Director, Tristan Capital Partners. Although there are questions about the sustainability of pensions in the light of falling bond yields, this group should still be better off than any previous generation of retirees – and therefore the demand for retirement and healthcare real estate should continue to grow.
Thinking about the residential needs of this ageing population, Victoria Wallace, Associate Director, Healthcare, Savills described the UK’s evolving retirement living sector. Although there are over 750,000 retirement housing units currently in existence, most of these were built before 2000 and are of poor quality. To meet the burgeoning demand, a number of new operators have emerged including Audley Villages, McCarthy & Stone, Extra Care Charitable Trust and perhaps most interestingly Birchgrove, who are developing a pure rental model (as against the more common build to sell), though they have yet to start work on their three sites. Wallace emphasised that such projects need to fulfil a range of requirements including proximity to transport and services, a strong local catchment, affordability and a fit with local planning frameworks.
An older population also means increasing demand for healthcare, and more primary care facilities are likely to be located in the community, given the funding pressures facing the NHS and the desire to limit the demand for hospital places. Healthcare REIT Assura is part of this trend, having now established a £1.8 billion portfolio comprising more than 550 healthcare centres across the UK. Assura’s Head of Investment, Patrick Lowther explained that these facilities often go well beyond housing GP surgeries to allow for out-patient treatments and mental health provision, for example, and are generally designed around the needs of older patients. In terms of tenure, they are usually leased to a GP partnership, whose rent is then reimbursed by the NHS. Lowther did however stress that the initial approval for such arrangements could be a lengthy process.