Later Living - perspectives from the UK and Europe

UK

The over 65s are by some margin the fastest growing demographic across western Europe so the later living sector continues to be a hot-spot. Unlike, say, purpose built student accommodation, the later living sector is incredibly diverse, ranging from highly specialist care-related facilities through to assisted living and independent living. With senior living increasingly being considered as part of mixed-use offerings, the sector is no longer the preserve of the specialists.

Like any other real estate sector, securing an attractive return on that investment is important.  This can be achieved by different tenure and payment structures, depending on the later living product in question.  In the UK, for care homes we often see a 25-30 year lease to an operator who runs the home and provides the care to residents, with index linked rent reviews to achieve a steady (but affordable) income stream.  

In integrated retirement schemes, the houses or flats are typically bought (or rented) by the resident directly who also pays a monthly service or management fee at an appropriate level for a retiree’s outgoings, with a deferred management fee payable when the individual permanently leaves a retirement village and the house or flat is sold.

From a planning point of view – the key consideration is making sure the consent is right. There are various things you need to consider. So, if applying for planning permission, how do you frame your application? How much flexibility do you need/want? What are the knock on implications of one approach rather than another? If you are investing in or building out an existing permission, what can you really do? We are seeing a significant trend in introducing later living into schemes which already have consents, as a way of diversifying the residential offer. This can work really well, but it is not at all unusual for there to need to be changes to the consent to facilitate this.

It isn’t always clear which class a particular proposition falls in where care is provided – it will depend upon the extent. It is possible to get around this by having a specific planning permission for the use proposed, with reference to use classes. However, the flip side of this, from the investor point of view, is that it results in less flexibility, which can impact on value.

Notwithstanding this, there is an increased recognition of the importance of later living – the National Planning Policy Framework now specifically recognises the importance of, and requires LPAs to consider, the need for older people’s housing. We are certainly seeing a real push for the planning regime in England to more fully embrace the later living sector, and to be more uniform in how it does so.

When selecting an operator it is important that an investor selects one that it is confident can and will provide the safe and dignified care that residents and their families expect, and that the regulator (the Care Quality Commission) requires.  This is most important at a human level, but ultimately, where that standard of care is not achieved, an investor’s association with that operator or home can be severely detrimental to it reputationally.

Similarly, it is important to select an operator that has an achievable business model / plan for their home or platform. Visibility and transparency over costs and budgets to ensure that an operator’s business model is viable – so that you have the confidence they will be able to provide continuity of care and meet their rental obligations – is of fundamental importance.

Spain

30% of the Spanish population will soon be over 65 years old. This demographic shift creates a strong and growing demand for high-quality, specialized housing solutions designed for seniors that cater to both independent living and more assisted formats.

Investors want to create communities that offer services and amenities focused on well-being, social interaction, and healthcare. Investors are increasingly drawn to the sector due to its long-term stability, as senior housing tends to have lower vacancy rates and longer rental periods compared to other asset classes.

The public sector in Spain has historically been involved in providing care and housing solutions for senior people through social services and affordable housing. However, public resources have become increasingly strained and there are administrative constraints.

Private investments, on the other hand, are usually more flexible and market-driven. The private sector has recognized the potential for high returns in this sector, particularly by catering to retirees looking for a higher standard of living and specialized services. The public sector in Spain is not competitive in this regard. Private developers often focus on more premium offerings, such as independent living communities, assisted living, and luxury senior housing. These investments are typically quicker to develop due to fewer regulatory constraints compared to public projects. However, private investors must still navigate complex land use laws, obtain the necessary permits, and comply with health and safety regulations if healthcare services are included.

There is also a growing interest in Public-Private Partnerships (PPPs) in the later living sector in Spain. Public investments are more focused on affordable care and access, while private investments tend to emphasize premium services and faster market adaptation. Public-private partnerships offer a hybrid model that combines the strengths of both approaches.

In terms of land use and zoning, generally, senior living developments are subject to the same basic zoning and land use regulations as other residential projects. However, depending on the type of facility and services provided in the complex, certain additional requirements might apply. For example, assisted living or nursing facilities may need to be zoned in areas qualified for healthcare-related services, as these projects often combine residential and healthcare.

As the sector grows, it’s likely that more specific planning regulations tailored to senior housing will emerge across Spain.

France

In France too we are seeing a trend of people living longer which has led to a growing demand for adapted care facilities for dependent elderly people but also for a reinvention of the later living sector. In France there can also be an issue with isolation of the elderly. This isolation is all the more marked in rural areas. Seniors there often have limited access to services and shops, especially if they don't have a car. This is why co-living offers are also increasing in number and popularity and showing new perspectives to senior residents. As such, the later living sector presents great opportunities in a promising market, supported by real, sustainable needs.

The later living sector in France was traditionally funded by public entities and non-profit making entities. The idea was that it was the French government’s role to take care of its ageing population and to offer solutions which would work for dependent people. Since the 1970s, we have slowly seen the emergence of private investments and we are now at a stage where it can be expected that the private later living sector will become more mature.

Private investors and operators tend to be more interested in serviced residences for seniors (RSS) and co-living residences. These assets are less highly regulated and offer more flexibility. The RSS market is still essentially based on forward sales and is therefore highly dependent on new developments. But the current rise in land prices in France, coupled with rising construction costs, is putting a strain on developers' initiatives.

This is quite a new sector in France and is not highly regulated for now, which creates more freedom for operators in the private sector. These types of investment can be very attractive as investors benefit from a fully delegated management model.

Clearly it is important to select an operator recognized for the quality of its management and its financial strength. An in-depth analysis of its results and ability to maintain a high occupancy rate is essential. The reputation of the operator is especially important in France and we are therefore increasingly seeing provisions in sales agreement whereby investors may withdraw from the investment in case of scandal. We are also seeing attempts to include such provisions in leases. In practice, however, it should be noted that it is very complicated to terminate commercial leases concluded with later living operators in France, as they are protected by law.

Where now?

It is clear that across the UK and Europe there is a societal and demographic need for investment in the later living sector.  Whilst each jurisdiction has a slightly different approach in terms of governmental involvement and planning requirements, the appeal of investment in the sector shows little sign of abating.

If you were unable to attend our recent European webinar on later living and would like to learn more about the latest market developments and how to identify opportunities please click here for the full recording:

For advice in this area or to discuss your requirements do get in touch with any of the Contacts listed here and we would be delighted to help.

For more information, please view our Later Living credentials here

Authored by Hannah Quarterman, Paul Tonkin, Siân Howes, Emilio Gomez, Margot Derumaux and Alice Houdart.

An earlier version of the article appeared in Estates Gazette.