Whilst the challenges caused by COVID-19 are unprecedented, and the pandemic has created an environment of uncertainty among operators and investors alike, there continues to be faith in the long-term fundamentals of the senior living sector. As a needs-based product, senior living has historically proven to be more recession-resilient and stable than traditional real estate sectors like retail and hotels.
Due to the at-risk nature of the elderly population during the pandemic, senior living operators are extremely focused on preserving the health and safety of their residents right now. Whilst COVID-19 is having a near-term impact on the number of new prospects, move-ins and occupancy levels, this decline in move-ins over the next few months will not fundamentally change the demographic makeup of the country. The rapidly ageing baby boomer demographic will still require fit for purpose accommodation in later life, and there is still a drastic under supply across the UK.
The issue that remains to be seen is how the sector may be impacted in the longer term if there is instability in the housing market. If the older generation is unable to sell their homes, they may not be able to buy into a retirement scheme, and there may be an increased demand for rental projects or other shorter-term operating models as a result. Quality operators have always been paramount in this sector but with move-ins stagnant, and the potential need to change operating models to adjust to a new economic environment, investors, more than ever, will be looking for best in class operators that can manage through extraordinary circumstances, such as COVID-19.
Though there is volatility in the sector at the moment, we think this will only continue in the near to medium-term while the global economy is suffering. Once the immediate impacts of the virus have passed, senior living will continue to be an attractive asset class and investors will continue to show strong appetite for the sector, as they have historically.
There are 3 key fundamentals about the senior living sector that remain:
- The ageing baby boomer population is not going away.
- As a needs-based product, the sector proved to be a more resilient investment than many of the other major real estate sectors during the GFC.
- Senior living involves caring for people and while other industries are shut down, senior living is not and will not be shut down. Operators are caring for their residents all day, every day, and this will and must persist.