Global property consultancy Knight Frank has released its Q2 2024 Seniors Housing market update, revealing key trends and data on development, investment and market dynamics in the UK’s senior living sector.
The firm’s latest report highlights an increase in the delivery of new seniors housing units, with 9,160 new units built in 2023, representing a 20% year-on-year increase. Notably, 58% of new units were in Integrated Retirement Communities (IRCs), reflecting a growing preference for this housing model.
While this marks the strongest year for delivery since 2016, it is still a huge undersupply compared to what UK needs to deliver to support its aging population – 50,000 units per annum according to the Mayhew Review.
Tom Scaife, Head of Seniors Housing at Knight Frank, commented: “Delivery this year, while stronger compared to previous years, is still a drop in the ocean. We urgently need to build more homes for our senior citizens. Delivering age-appropriate accommodation releases critical family housing back to the market, while simultaneously helping to save the NHS and social care system money. It also improves the lives of our rapidly aging population.
“Seniors housing will help Labour meet several of its new pledges – including delivering 1.5 million homes over the next five years and reducing NHS waiting lists – and it should be prioritised by this new government.”
The data also shows a trend towards larger developments, particularly in the IRC sector. The average size of new IRC schemes which include an event fee reached 117 units per scheme in 2023, up 30% compared to five years ago. This shift towards larger schemes is driven by investors’ desire for scale and the need to improve operational efficiency.
Despite the increase in new supply, the report reveals a stark contrast in the age of existing stock. Some 89% of existing seniors housing stock was built before 2012, creating a two-tier market in terms of quality and suitability for modern needs.
Looking ahead, Knight Frank’s analysis shows 53,719 units either with planning permission or under construction across the UK. This pipeline demonstrates continued investor confidence in the sector, despite ongoing challenges in the planning system, development and financing costs. However, while delivery is picking up, it remains significantly short of need with an additional four million seniors forecast to be living in the UK by 2043.
The investment landscape shows signs of caution, with volumes reaching £340 million in Q1 2024, focused entirely on land acquisitions. This reflects the growth phase of the market, with investors needing to develop rather than acquire existing stock.
Knight Frank’s report also highlights an increasing diversification in tenure options, with a particular focus on rental products. Private rental units are expected to nearly double to 10,000 by 2027, as operators and investors seek to cater to a broader range of residents and their preferences.
Tom Scaife added: “The seniors housing sector continues to show strong fundamentals, with increasing delivery of new stock and growing investor interest. However, significant challenges remain around planning policy, development and financing costs. The evolution towards larger schemes and more diverse tenure options reflects the sector’s push to improve operational efficiency and cater to changing consumer demands.”
Oliver Knight, Head of Residential Development Research at Knight Frank, added: “Our data shows a clear increase in development activity, with annual completions up 20% in 2023. However, at just over 9,000 units per year, this remains well below the 50,000 annual target independent research has recommended be delivered each year. The growing pipeline of over 53,000 units in planning or under construction is encouraging, but accelerating delivery will be crucial to meet the housing needs of the UK’s rapidly ageing population.”