Where can yields be found in senior housing across Europe?

While many confuse assisted senior housing with traditional nursing homes, real estate developers and operators have made an important distinction that has not only improved the lives of many, but provided much relief and promising yields to residential investors that may be having a tough time in their current region. 

Nursing homes, which originated in the UK, popped up as a way to provide care for the elderly that could not live at home but couldn’t be kept in a hospital. Senior housing, however, are living units where the elderly have separate living spaces but communal areas to make sure they stay sociable and mentally healthy. There are also care services on site, yet the business model is structured much like student housing. 

But is there sufficient demand for this? Does this sector have too much exposure to demographic change? How does this differ across different cultures?

These questions and more were discussed during a session focusing on senior housing at Europe GRI, where key players in real estate asked where the demand came from. 

The main driver for nursing homes and senior housing facilities is a combination of urbanisation and the ageing population. It also grew in popularity after the stigmatisation and generally grim portrayal of traditional nursing homes drove the elderly to more of an extended living experience. 

When it comes to the nuances of customer needs though, there are many discrepancies between European countries (and the US) that must be considered. 

In France, senior housing is becoming quite popular - institutional investors account for around 50% of the investment in the sub sector as well. One operator provided some numbers - they tried to have up to 80% of independent people, rent/turnover ratio is up to 40% and institutional investors benefit from 12 year contracts. 

For Germany, it’s clear that the culture of growing old is changing. Before, old German people just wanted a sleepy nursing home in a rural area. Now however, they want modern, senior living facilities right in the city, close to their families. 

The asset class is quite new for Italy however. The demand is very strong, and landlords are reporting a compression in yields (from 7% to 6%). Culturally Italians have a different approach towards their elderly and therefore the community element isn’t as important for these assets. 

The rise of alternative residential has been on the rise across Europe, and now this structure of living has been tried and tested with students, there’s nothing stopping this sector from taking off. It’s experiencing a steady growth, with yields of around 5-6%, and the leases are usually long term contracts. Some may suggest this is a worthwhile alternative to retail and offices, in which yields are currently tanking. 
 

For more information on the senior living and alternative residential markets across Europe, join the regions more important real estate players at our upcoming European events. Italia GRI, France GRI and Deutsche GRI will take place in Q1 and Q2 2020, and gather the most senior real estate heads. 

Article by Matt Harris