Senior Living Annual Review 2020 - Knight Frank
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Senior Living
knightfrank.com/research
Annual Review
20202 3
S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0 S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0
INTRODUCTION In the next five years we expect to see a race to scale and
brand-building from some of the early movers to create
Our market-leading research examines the fundamentals of the management platforms with operational efficiencies.
private Senior Living market, from sales to operations, sharing the
results of our survey of some of the leading operators in the sector.
t is forecast that 2020 will be with varying facilities and services, from This compares with penetration delivery is still dwarfed by the UK’s
I a record year for institutional Retirement Housing designed with the rates for Housing with Care schemes in xisting senior living units per 1,000 people aged 75+
1 | E ageing population. It means that, even
investment into the UK downsizer in mind, through to Housing Australia, New Zealand and the United though total delivery is forecast to
Existing units per 1000 people aged 75+ Existing units (RHS)
senior living market with £1.5 billion with Care schemes which provide high States of 5%, 5.5% and 6% respectively. For continue to rise, in real terms the number
150 1,000,000
Exisiting units per 1,000 people aged 75+
anticipated to be spent by the end of the levels of services, care and support as an the UK to just match the lowest of those of seniors housing units per 1,000
145 900,000
year, according to data from our in-house integral part of their proposition. figures would require nearly 400,000 140 800,000
individuals aged 75+ is expected to drop
Total senior living units
deal tracker. However, despite this growth, there additional Housing with Care units. 135 700,000 to 120 by 2024, down from 137 in 2010
130 600,000
Rising investment volumes are remains a significant supply and demand Based on our analysis of pipeline and 129 currently.
125 500,000
reflective of the fact that investors are imbalance, and one which puts the UK data, we are anticipating a 48% growth in 120 400,000
It's clear that a step change in
increasingly recognising the potential far behind peer countries. In the UK the number of Housing with Care units 115 300,000 new delivery is required if the huge
for growth in the sector, underpinned at Housing with Care market, for example, over the next five years. The Retirement 110 200,000 imbalance between need and supply is
105 100,000
its core by rising demand and a lack of there is a current supply of 78,383 homes, Housing market, which currently to be reversed.
100 0
2001
2002
2003
2004
2005
2006
2007
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2009
adequate supply. There is a move toward yet a total population of over 65s of 12.4 accounts for 658,000 units is forecast to Consequently, in the next five years
providing more choice for residents million, based on a household size of 1.3 grow by 10% over the same time, taking we expect to see a race to scale and
Source: Knight Frank, ONS, EAC
including through mixed-tenure and adults, this gives the UK a penetration total seniors housing stock to more than brand-building from some of the early
rental-only options and more schemes rate of just 0.82%. 800,000 by 2024. However, the rate of movers as delivery rises and as they look
to create management platforms with
operational efficiencies.
2 | Housing with Care market penetration rates In this report we share the findings
of our second Senior Living Operator
KEY TRENDS
12.4m 0.82%
Survey, based on data shared with us by
78,383 leading Housing with Care operators.
1 2 3 4 5
EX I S T I N G H O U SI N G W I T H 6 5 + P O P U L AT I O N I N P EN ET R AT I O N R AT E The results highlight the diverse
C AR E U N I T S I N U K THE UK
sources of income – across different
departments and timescales – with
deferred management fees, rent,
P EER C O U N T R Y P EN ET R AT I O N R AT ES
( 6 5 + L I V I N G I N H O U S I N G W I T H C AR E EQ U I V AL EN T management and service charges,
ground rents, care and wellness, and
INCREASED
INVESTMENT
LARGER
SCHEMES
URBAN
LOCATIONS
TENURE
OPTIONS
DESIGN
EVOLUTION
5.5%
N EW Z EAL AN D
5.0% AU ST R AL I A
6.0%
U N I T ED ST AT ES
food and beverage all contributing.
Operating costs, meanwhile, are
Institutional investment with the capacity to Closer proximity to Increasing mixed- Greater institutional dominated by staffing and can
is driving the market deliver operational high street, developing tenure and rental-only investment has driven extend beyond single assets to head
P EN ET R AT I O N R AT E
6%
as platforms are being efficiencies and a range mixed-use schemes propositions, as well optimisation of the office functions.
5% 492,769
constructed to deliver of unit sizes that and re-purposing sites as more variations of proposition – both the In addition, we have analysed more
4% 397,577
long-dated income are affordable to the currently in other land Deferred Management property and the than 16,000 senior living property sales
returns local catchment uses, such as retail Fee (DMF) structures service provision
140 3% 302,385 800,000
across the private sector to give a view on
providing increased
130 2% 207,193
700,000
pricing and price changes over time.
120 1% 600,000
tenant choice best suited 112,001 It has, arguably, never been more
16,809
110 500,000
to their financial profile, 100
ADDITIONAL HOUSING WITH CARE UNITS REQUIRED
400,000 important to have high quality data to
90 300,000
budget and preference assist with investment decisions and
Source: Knight Frank, ONS, EAC, ARCO
80 200,000
Note: This is calculated on the assumption that an average household size in a Housing with Care property is 1.3 adults. move the sector forward.
70 100,0004 5
S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0 S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0
HOUSING WITH CARE
CURRENT LANDSCAPE
OPERATOR SURVEY
RETIREMENT HOUSING HOUSING WITH CARE TOTAL SENIORS HOUSING MARKET We have been fortunate enough to work with a number of leading
operators who between them account for 50% of the Housing with Care
sector across both private and affordable markets. This analysis gives
657,602 78,383 735,985 us a unique and detailed insight into operations, performance and
2019 2019 2019 resident profile.
690,482 116,007 806,489
2024(F) 2024(F) 2024(F)
5%
FORECAST GROWTH (%)
48%
FORECAST GROWTH (%)
10%
FORECAST GROWTH (%)
HOUSING WITH CARE – AT A GLANCE
2020 ONWARDS*
90 UNITS 78,383 74% >90
units is the average
80 UNITS 2018 2019 existing units affordable, 26%
private sale or rent scheme size
2010-19 60 UNITS
2000-9 2015 2016 2017
AVERAGE SIZE OF UK PRIVATE
9,000 48% 4,300 38,000
HOUSING WITH CARE SCHEMES AVERAGE UNITS DELIVERED PER ANNUM (2015-2019) growth in units forecast units delivered on average additional 38,000 units
by 2024 per year (2015-2019) forecast 2020-2024
DEVELOPMENT PIPELINE
THE SURVEY IN NUMBERS
APPLICATION FULL PLANNING GRANTED – UNDER TOTAL
SUBMITTED CONSTRUCTION NOT STARTED CONSTRUCTION
4,087 4,990 4,302 13,379
5k 7k
RETIREMENT UNITS UNITS UNITS UNITS
50% 110
HOUSING
private Housing with affordable Housing
5,380 4,263 7,747 17,390 private market** schemes Care units with Care units
HOUSING UNITS UNITS UNITS UNITS
WITH CARE
9,467 9,253 12,049 30,769
TOTAL SENIOR UNITS UNITS UNITS UNITS
HOUSING
Source: Knight Frank operator survey, EAC, Glenigan *based on private Housing with Care schemes under construction.
Note: Housing with Care includes Extra Care and Close Care schemes identified within the EAC database Supply landscape as at end 2019. *Peer countries includes US, Australia and New Zealand
Note: Pipeline data includes all applications logged in the planning portal since January 2018 **Private Housing with Care operators who have delivered 3 or more schemes since 20006 7
S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0 S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0
OCCUPANCY SALES AND RENTALS
nderstanding tenant profiles to adequately plan for housing across age including those related to wellness, food ousing with Care generally
U is crucial to helping the sector
plan for the future. According
brackets. A proper policy framework and
separate use class for seniors housing will
and beverage and entertainment. This is in
addition to services such as care, including
H achieves higher sales values
on average compared to
verage price paid per annum for senior living schemes in England
6 | A
Achieved price (£)
to the results of the survey, the average be beneficial in this regard. assistance with daily activities, and Retirement Housing, though this ■ Retirement Housing ■ Housing with Care
age of residents in private Housing with The average length of stay is seven specialist and clinical care. By comparison, is typically due to the difference in
Care schemes across the UK is 83 years years, though this does vary depending on schemes more than 10 years old had an propositions – both in terms of the
£600,000
60%
old, with more than 80% of current age of entry and level of frailty, and also by average of 5-6 additional amenities. specification and design of the property
residents over50%
the age of 80. the level of services and care provided by An increase in amenity provision and levels of service.
% distribution
The average40%
resident age increases in the operator. reflects a focus on ensuring residents are Analysis of sales data for properties £500,000
£505,276
30%of a scheme, though we
line with the age In keeping with the growing maturity able to 'age in place', though it is also clear which have sold over the last year shows
£470,259
£457,989
£462,501
£457,245
would expect 20%
this trend to stabilise as a of the sector, the analysis shows newer from the survey results that the proposition that achieved £psf levels have risen in £400,000
Achieved pricing
scheme approaches
10% 20 years of age. schemes tend to offer higher levels (and a of a scheme needs to be tailored to the local 2020 compared with 2019, up by 2.5%
£365,310
£369,345
£361,279
£365,565
More than half
0% of residents live alone, wider range) of services. market to address affordability, absorption for Retirement Housing and by 3.6% for
£347,959
£357,427
70-74 75-79 80-84 85-89 90+ £300,000
with females making up a large proportion On average, schemes less than 10 years rates, scheme design and level of service Housing with Care. Whilst this data will
£309,137
Resident age (years)
of this. old had at least 8 amenities* on average and care. be influenced by the schemes on sale
When looking at where residents in any given year, it is notable that an £200,000
moved from, it becomes clear that seniors increase was recorded across all regions
housing is primarily a local product verage senior living unit price vs average local residential house price**
4 | A within England. £100,000
designed and built for local people. England average 78% HOUSING WITH CARE Indeed, further analysis shows newer
Almost half of residents moved from Yorkshire and The Humber 71% schemes are achieving a higher £psf in
£0
West Midlands 79%
within 10 miles of a scheme. While this general. This reflects the maturing of the 2015 2016 2017 2018 2019 2020
South West 80%
can vary by operator and motivations of market, with newer schemes often boasting
South East 80%
a resident, it highlights the need for local 88% 75% higher levels of service and care and Source: Knight Frank, Land Registry
North West 75%
authorities, developers and communities London 79% subsequently achieving higher pricing.
East of England 74%
East Midlands 69% RETIREMENT HOUSING
urrent private Housing with
3 | C M E T H O D O LO GY
Source: Knight Frank, Land Registry
Care resident age
60%
** Local residential house price is the average price of a detached, semi-detached or terraced house within the postcode
district of each senior living scheme, averaged to a regional level
50%
Our pricing analysis is based on a
7 | Database sample: % of sales 8 | Database sample: Sales
sample of more than 300 schemes examined by region, 2015-2019 per annum by product
% distribution
40%
across the country developed since
30%
verage private Housing with Care resident age vs scheme age
5 | A Retirement Housing Retirement Housing: New Build Resale
2000, split between Retirement Housing with Care Housing with Care: New Build Resale
20% Average age of resident Linear (Average age of resident)
Housing and Housing with Care. The
2,000
currently in scheme
95 schemes comprise more than 8,500
Av. age of resident
10%
90
0%
85 individual units, which we tracked
80
70-74 75-79 80-84 85-89 90+
75
from original sales through to today,
Resident age (years) 70
including re-sales. This provided us 1,500
0 10 20 30 40 50
Source: Knight Frank operator survey YORKSHIRE &
Scheme age (years) with data for almost 16,000 senior
THE HUMBER
Source: Knight Frank, Land Registry
7% | 6%
living property transactions. This
Number of sales
*This analysis excludes basic amenities such as lift and lounge. EAST
analysis includes schemes from all MIDLANDS
5% | 6%
1,000
major private senior living operators,
NORTH WEST EAST OF
which combined have delivered almost 6% | 2% ENGLAND
11% | 10%
WEST
PRIVATE HOUSING WITH CARE RESIDENT SNAPSHOT 70% of private units in schemes of MIDLANDS
8% | 8%
20+ units. 500
WALES
1% | 1%
SOUTH WEST
22% | 20%
SOUTH EAST LONDON 0
32% | 40% 6% | 7% 2015 2016 2017 2018 2019 2020
83 78 60% 60% 65%
40% 70% 75%
38-41%
80% 85% 7 years
Source: Knight Frank, Land Registry Source: Knight Frank, Land Registry
Average current Average entry age % occupied by % occupied % residents moved Average length of
age of resident single resident by couples within 10 miles stay (mature villages*)
*Analysis includes villages that are have been operating for 3+ years8 9
S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0 S E N I O R L I V I N G A N N UA L R E V I E W 2 0 2 0
Price performance PRICE CHANGE
9 | Average price paid by region for senior living properties in England (2015-YTD 2020) As detailed in last year’s report, Retirement Housing pricing largely tracks the average
house price index for England, while Housing with Care continues to outperform both.
5%
(1%)
enior Living property prices vs Residential
10 | S RETIREMENT
Indexed 100 = 2006 HOUSING
Retirement Housing
Retirement Housing Housing with Care UKHPI (England and Wales)
Housing with Care
180
13%
160
ENGLAND AVERAGE 140
120 (2%)
100 ENGLAND &
£ PS F 80 WALES HPI
60
40
20
0
2006
2008
2005
2009
2007
2010
2014
2016
2018
2019
2012
2013
2015
2017
2011
20%
(4%)
Source: Knight Frank, Land Registry
HOUSING
NO RT H WES T N O R TH E AST WITH CARE
£ PSF £P SF
M E T H O D O LO GY
N/A
The house price index uses hedonic regression based on price and controlling for
characteristics such as region, property type and size. The dataset has a bias due to the nature
WE ST MIDL ANDS of a sample, with this being heavily weighted towards the South East and South West and to
flats. We have tried to control for this. Top percentage figure shows 5-year growth
£ PSF £P SF (Figures in brackets show CAGR 2015-2019)
SOUT H WES T E AST M I DLAN DS
SENIOR LIVING RENTAL
£ PSF £P SF
The number of private senior living rental
properties in the UK is forecast to increase verage monthly
11 | A
asking rent
SOUT H EAST E AST O F E N G LAN D by 160% in next 5 years, from almost 5,000
currently to more than 13,000 by 2024.
£ PSF £P SF RE TIRE M E N T HOUSIN G H OUSI NG WI TH CARE
Growth will be driven by a rise in the number
of Housing with Care operators allocating a 1 BED 2 BED 1 BED 2 BED
LO N DO N
proportion of their pipeline to the rental market.
LO N D O N £2,700+ £3,000+ £3,600+
£P SF
Even accounting for such rapid growth,
* senior housing rental stock will only account N O RT H WEST £900-£1,800 £1,200-£1,600 £1,300-£2,000 £2,000-£2,300
* Achieved £psf in London ranges from for 3% of the total number of private senior
£600 to in excess of £1,500 psf. S O U T H EAST
housing units, which is currently dominated by £1,500+ £2,200+ £2,700+ £3,000+
‘for sale’ stock.
10 | Average achieved £PSF in 2019 vs age of scheme S O U T H WEST £1,400-£2,300 £1,900-£2,900 £1,700-£2,300 £2,000-£2,600
However, this dynamic is changing, with
the market driven by an increasing weight WEST M I DL A N D S £1,200-£1,900 £1,500-£2,400 £1,500-£2,600 £1,900-£2,500
■ Retirement Housing ■ Housing with Care of capital from investors, as well as greater
£1,000 demand from tenants for flexibility – which YORKSHIRE AND THE HUMBER £1,400-£2,000 £1,600-£2,100 - -
£900 includes being able to delay the sale of the
EAST O F EN GL A N D £1,850-£2,350 £2,200-£2,900 £2,300-£2,900 £2,700-£4,000
£800 family home – and quicker access to services
£700 and care. N O RT H EAST £850-£1,150 £1,250-£1,450 - -
We expect to see a rise in take-up of
£PSF
£600
£500 the ‘one move solution’ with increasing EAST M I DL A N D S £1,500-£1,900 £1,800-£2,200 £1,700-£3,300 £2,000-£2,300
£400
service and care being delivered into rental
propositions. A rental apartment or care suite
£300
can provide increased tenant choice best
£200 AVE RAGE ASKI N G RE N T £1,950 £2,380 £2,400 £2,950
0 5 10 15 20 25 30 35 40 suited to financial profiles and preference.
Age of scheme
Source: Knight Frank, Land Registry10 11
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OPERATIONS Costs
Like income, costs in Housing with Care
14 | Components of Costs (gross p.a. 2019/20)
schemes vary and are influenced by
service and care levels, location and scale.
PAY ROLL 61%
However, across the survey, staffing is
identified as the largest outlay, accounting
E STATE MANAG E ME NT 9%
for approximately 61% of all costs incurred
by private Housing with Care operators in
the in the 2019/20 financial year. F&B 15%
As a proportion of income, staff costs
12 | Components on Income (gross p.a. 2019/20)
represent 35% of revenue across the CAR E AND W E LLNE S S 5%
SE RV I C E /
CAR E AN D
schemes surveyed. The analysis highlights
G RO U N D R E N T MA NAG E ME N T DMF F &B OT H E R
WE L L N E S S
C HA RG E there is approximately one full-time
E STATE AG E NCY 2%
staff member to every four units within
Schemes with third
2.7% 65.9% 22.5% 6.8% 1.5% 0.7% a private Housing with Care scheme.
party care
In terms of total numbers of staff, on OTH E R 8%
Schemes with operator
2.1% 58.7% 20.2% 5.9% 12.5% 0.4%
delivered care average, 38% are employed in care and
wellness, 35% in estate and scheme Note: Staffing costs for each division are included under Payroll
management, and 19% in F&B.
Income financial year, though such charges vary apartments as well as to the wider
Income from Housing with Care schemes at each scheme depending on the level of community. Indeed, of the schemes
is varied and comes from a number of service, care and amenity. surveyed which offer either a café or
different sources. Our survey shows that Deferred Management Fees (DMF), restaurant, 50% have opened up their
AFFORDABLE HOUSING WITH CARE
service or management charges account which are payable when a resident leaves F&B offering to the public.
for the largest proportion of income a scheme and are used to help offset A large proportion of operators
at approximately 60% in the 2019/20 upfront costs and align the interests of surveyed deliver care themselves, The affordable sector within the UK is much more established active operators accounting for more than a third of total delivery
the operator and the resident, form the though a variety of different models than the private market, accounting for 550,000 units and since 2010*.
second largest proportion of income for exist including partnering with external representing 75% of the total market. Our operator survey includes a sample of data from leading
aximum deferred
13 | M operators. The remainder is from food providers, reflecting the nascent nature The majority of stock is Retirement Housing, with on-site affordable Housing with Care operators. The portfolios of these
management fees at schemes
and beverage (F&B) facilities – including of the sector, as well as the different management staff but limited services and care. However, there operators total more than 28,000 units. This has provided us
restaurants and cafes, care and wellness approaches adopted by investors and are still a number of Housing with Care operators in this space, with an invaluable insight into key metrics for the market on
7%
and ground rents. operators. For those operators who and significant growth in the sector is expected, with the 5 most occupancy, length of stay, delivery of care and staffing.
33%
The survey shows how Housing with do deliver care themselves, care and
21%
Care schemes support income through wellness represents on average between
provision of services, both into resident’s 10-20% of total income. Residents
PRIVATE HOUSING WITH CARE –
SERVICE AND CARE OVERVIEW
38%
5 4.5% 79 90% 112
■ 0-5% ■ 5-10%
GYM P O OL BAR RESTAU RA N T years years units
Average length Void rate Average current % residents moved Average scheme
■ 10-15% ■ 15%+ of stay resident age within 10 miles size
DMF Ranges
Note: % shown on chart are the proportion
of schemes with each DMF range
56% 47% 75% 7 7%
Staffing Care
DMF
O P E RATOR D E L IV E R ED CAR E 59%
DMF structures vary between
operators and are payable on
30 13% 79% 9% 733 10
T H I R D PART Y D EL IV E R ED CAR E 41%
resale*. DMF revenue accounts
for approximately 20% of total CA R E DEL IV E R ED TO LO CAL C OM M U N IT Y 45% Average Full Time % in full % in full % in full Hours of domiciliary Hours of domiciliary
revenue, though this does vary. Staff employed employed employed employed in care provided per care provided per
per scheme in housing in care other capacity week (scheme total) week per unit
CA R E H OM E IN C L U D E D WIT HIN S C HE M E 30%
Source of all charts: Knight Frank operator survey. * Some DMF models have options including those paying on the way in. Source of all charts: Knight Frank operator survey. *5 most active affordable Housing with Care operators in the market delivering units since 2010.Knight Frank Senior Living Senior Living Healthcare
The Knight Frank Senior Living Team Tom Scaife Julian Evans FRICS
provides a full range of services to the Head of Senior Living Head of Healthcare
sector from research and consultancy, +44 20 7861 5429 +44 20 7861 1147
valuations and capital markets aimed tom.scaife@knightfrank.com julian.evans@knightfrank.com
at senior living developers, funders and
Peter Youngs
operators and specialising in senior housing,
Partner – Valuation & Advisory
housing with care, retirement living, and
+44 20 7861 1656
assisted living schemes.
peter.youngs@knightfrank.com
Special thanks to the operators who Research
contributed to this report.
Lauren Harwood
Head of Senior Living Research
+44 20 7268 2599
lauren.harwood@knightfrank.com
Proud supporters of
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