Senior living: demographics, operators, options and investment

HEALTHCARE
Tim Harrup

The healthcare market for real estate professionals includes one segment which has been strongly growing in importance over the past few years – ‘senior living’. Real estate advisor JLL has recently published a report on this market in Belgium and has included an overview of the sub-segments within it, as well as looking at the segment as an investment opportunity.

JLL starts by setting the scene: the Belgian population over 65 years old has grown more than 18% in the past decade. Another 35% growth is forecast for the population category of over 65 years old by 2040. At that time, over 65-year-olds will account for more than 25% of the population against less than 20% now.

Types of care

JLL identifies three main types of senior living options. Home care: Most people, it says, prefer to live in the house they have occupied for most of their lives. The problem is that many homes are not adapted to the problems of elderly and less mobile people and that, with the advancement of age, the dependency rate grows and a move to a more residential form of care becomes necessary. In Belgium – as in the other OESO countries – some 13.6% of the population of above 65 years old receives some form of long-term care, split between 5.1% home care and 8.5% nursing home care.

Assisted Living: in this type of senior housing retirees can live independently. This type of senior housing can be considered as an intermediate form between living at home and in a nursing home. The accommodation is adapted to senior living (lifts instead of stairs, accessible by wheelchair, wider doors, adapted bathrooms, etc.). The facilities offer 24/7 assistance, but not 24/7 personal care, although temporary medical care is an option in case of an emergency situation. Many service flats are linked to a nursing home which occupants transfer to as their needs evolve with time.

Nursing homes: Nursing homes offer permanent assistance and personal care to elderly people who cannot live independently and need 24-hour supervised care including meals, activities and healthcare. A nurse or another medical supervisor is always present on the premises. It is when other forms of senior housing and care, such as care at home or assisted living, are no longer possible and the need for assistance and personal and medical care becomes permanent, that people move to a nursing home.

Operators

Operators of nursing homes and service flats in Belgium can be divided into three types: private non-profit, private for profit and public. A market survey shows market shares of approximately 38% of private for-profit operators, 33% of private non-profit and 29% of public operators. The private for profit sector is dominated by large French groups amongst which Korian (formerly Senior Living Group), Armonea and Orpea form the top three. Important Belgian private for profit players are Vulpia and Vivalto.

Investment

Within the context of this growing market, investors are clearly very interested. And indeed € 1.65 billion were invested in senior housing in Belgium over the past five years, representing an annual average volume of € 331 million. The average transaction size over this period stands at € 31 million. Buyers were mainly local REITs and institutional investors together with occasional French and British investors. Sellers were an institutional investor, operators, developers, private investors and REITs. The Flemish Region attracted 58% of the invested volume, the Walloon Region 25% and Brussels 17%. JLL expects that foreign investment interest for the Belgian market will further intensify in the next years as a consequence of the healthy underlying dynamics and characteristics of the market.

A comparison of prime yields with those applicable elsewhere in Europe shows that Belgian yields suggest a mature market, in line with first tier countries such as Germany. Prime yields vary from 3.25% in Sweden to 5.50% in Portugal, with Belgium in between with a prime yield of 4.00%, in line with other Western European markets such as the UK, Germany, The Netherlands and France.