What does the market look like in the UK?

The over 65s are by some margin the fastest growing demographic across western Europe. In that context it is perhaps no surprise that the later living sector continues to be one of few hot-spots in an otherwise still muted market. In 2023, CBRE estimated a supply gap of over 600,000 units in the UK alone. The opportunities here are obvious but the challenges should equally not be overlooked. 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 and with senior living increasingly being considered as part of mixed-use offerings, the sector is no longer the preserve of the specialists. Our article and webinar will provide you with our insights in terms of the legal challenges and opportunities presented by the sector.

The UK is no exception in terms of having an ageing population, so there is a societal need to provide a range of suitable purpose built alternatives for our elderly population – whether that be:

• More traditional residential care homes offering wraparound and/or specialist care (such as for dementia); or

• IRCs – integrated retirement communities (or retirement villages), where the residents own or rent their home and have access to a wide range of on site amenities and leisure offerings.

The sector in the UK is still in its (relative) infancy compared with other more mature markets such as Belgium (in respect of residential care homes) or New Zealand and Australia (in respect of retirement communities). This means there is opportunity here for investors and developers alike.

Similarly, the consolidation rates – that is market share - in the UK, France, Spain and Germany are relatively low, and again this presents opportunities for pan-European aggregators. 

We are currently seeing an increase in urban retirement community schemes, with roughly 70% of schemes being in urban as opposed to rural areas last year.  Similarly, we are seeing developers of mixed-use urban regeneration and placemaking schemes introducing a senior living component into their plans.

How does the public/private distinction work in the UK?

In the UK the private sector is dominant. Between 70% and 80% of senior living stock is privately owned. This contrasts markedly with other European countries where there is more state involvement, and again makes the UK attractive for investors.

However, where there is residential or medical care provided, there is a regulatory overview by a statutory body - the Care Quality Commission – which inspects homes to ensure that suitable levels of care and health and safety standards (amongst other things) are being met.

What are the key priorities for investors when investing in the later living sector in the UK?

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.  For example, 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, in return for payment of a monthly service or management fee at an appropriate level for retirees' outgoings, with a deferred management fee payable when the individual permanently leaves a retirement village and the house or flat is sold.

"ESG" credentials are an increasingly important consideration in any investment decision.  All new stock is designed and constructed with the "E" in mind, but investments into the senior living sector, where the broader societal benefits of freeing up under occupied homes, and providing alternatives that can have the impact of reducing levels of loneliness and providing a greater sense of security (whilst retaining independence) to the elderly population are attractive to investors seeking to make a positive societal impact.

What about the UK planning regime and later living? Is the sector viewed differently?

In the English planning system, we have the concept of use classes – where different uses split up into categories and certain rights and requirements often flow from those classes. In the later living sector, the two relevant use classes are C2 –  nursing or care homes, or C3 – standard housing, with no care. This presents quite a binary approach, which doesn’t reflect the nuances of how this – and many other – sectors are evolving.

This also means that 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, 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.

However, the extent and way in which different LPAs embrace the sector varies significantly around the country, meaning that the policy context - which dictates how likely a scheme is to get planning permission and then what the requirements of that permission are likely to be, can feel unpredictable.

The approach to affordable housing, in particular, is a good example of how these issues can manifest themselves. In general, standard C3 type housing will be subject to a requirement to provide affordable housing. This often isn’t the case for C2. This can accentuate the importance of which use class you find yourself in. Many find this particularly problematic, because developments such as integrated retirement communities have to provide such extensive facilities to residents, that their viability model is significantly different to those of standard market providers, but their requirement to provide affordable housing is the same.

Where there are affordable housing requirements, these can be problematic, unless relevant policy specifically recognises the types of affordable product which can be provided within the later living sphere – in general terms, standard AH products won’t work.

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.

What key points do investors need to think about when selecting an operator?

We are most commonly talking about the operator of a care home where an element of care is provided.  It is important that the investor selects an operator that it is confident can and will provide the safe and dignified care that residents and their families expect, and that the regulator (the CQC) 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.

What are some of the considerations for someone looking to invest in or develop in the later living sector?

In the context of care homes, the ability to provide continuity of care to residents in the home you own is key.  For this reason, in addition to getting the selection of operator right in the first instance, and setting rents/yields at realistically achievable level, it is often important to ensure that an appropriate security package is taken over the business and assets of a home/platform to enable an owner to “step in” and provide that continuity of care in the event of operator default or insolvency.

What does the future of later living look like in the UK?

It looks unlikely that there will be swathes of governmental investment in the sector, and accordingly the private sector will likely be at the forefront of continuing to supply new stock and deliver new models for the sector.

Turning to Europe, why is the later living sector such an important area for the real estate market, and what does the market currently look like in Spain?

The later living sector has emerged in Spain as one of the promising areas for real estate investors for three key reasons:

First, Spain, like many other European countries, has an ageing population: 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.

Second, this sector is not just about providing housing, but about creating 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.

Third, in terms of the current market landscape in Spain, the later living segment is still in its early stages as we have also seen with the UK. However, it is rapidly gaining momentum. Several international and domestic developers are actively exploring opportunities to develop senior living projects, particularly in coastal areas and major cities where senior citizens seek a better quality of life. In contrast to what we are seeing in the UK, in Spain the sector now benefits from strong governmental support, with policies aimed at promoting housing alternatives for the elderly.

This combination of demographic trends, investor interest, and market potential makes later living a particularly attractive sector within the Spanish real estate market.

Is there a similar distinction in Spain between public and private investments?

There are notable distinctions between public and private investments in the later living sector in Spain.

Similar to the position in France, 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. In addition, public investments are often subject to strict budgetary constraints, slower bureaucratic internal processes, and a higher level of regulatory oversight. In addition, public facilities tend to focus on providing affordable, essential care rather than premium services or amenities.

Similarly to the UK and France, 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.

What about in terms of planning law, is the sector in Spain viewed differently to other residential development?

From a planning law perspective, the later living sector in Spain does present some distinctions when compared to other types of residential developments, although these distinctions are still evolving as the sector gains more prominence.

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.

Given the increasing demand for senior housing driven by Spain’s ageing population, some municipalities may grant priority to later living projects due to their social importance. However, local governments may also sometimes impose specific conditions related to the integration of the development within the existing community.

There is often a focus from Spanish public authorities on integrating green spaces and wellness areas, which are particularly important for enhancing the quality of life for elderly residents. Planning laws in certain regions might require later living projects to include a greater proportion of green spaces compared to other residential developments.

Since the later living sector is relatively new in Spain, there is still some regulatory uncertainty in how these projects are treated from a planning law standpoint. Not all municipalities have developed specific guidelines for senior living projects, which means that developers may face inconsistent requirements depending on the region or local planning authority. This can create legal and planning risks that developers in more traditional residential sectors might not encounter.

So, while later living developments share many planning law similarities with other residential projects, the sector is viewed differently in terms of design, zoning, and regulatory considerations, particularly when health and accessibility factors come into play. As the sector grows, it's likely that more specific planning regulations tailored to senior housing will emerge across Spain.

What are some of the considerations for investors looking to invest in or develop in the later living sector, from a legal perspective?

When investing or developing in the later living sector in Spain, there are several key legal considerations that potential investors and developers must take into account to ensure successful project execution and regulatory compliance.

First, depending on the type of later living facility being developed and the services rendered, different regulatory frameworks apply, so you will not only need to deal with municipal authorities, but also specific licenses from regional healthcare authorities will apply.

Second, as touched on above, later living developments in Spain may require land to be specifically zoned for healthcare or mixed-use residential purposes. Zoning regulations could also dictate building density, green space requirements, and accessibility standards that are critical for senior living projects.

Early due diligence is essential to ensure the chosen site complies with local planning regulations or to identify potential obstacles such as “re-zoning requirements”.

Third, the legal structure of agreements with residents is another critical area. Whether the project is based on rental models, long-term leases, or a 'right-to-use' agreement, it is important to draft clear contracts that comply with Spain’s tenancy laws and consumer protection regulations. Developers must ensure transparency in terms of fees, services provided, and exit options for residents. Unclear or unfavourable terms could lead to disputes, legal claims, or damage to the project’s reputation.

What does the future of later living look like in Spain?

While we don't have a crystal ball, looking at the current position and market trends we believe that the future of the later living sector in Spain is highly promising, with significant opportunities for growth and innovation, and it will be driven by both demographic trends and evolving regulatory landscape.

As we have seen in Europe and the UK, one relevant aspect to consider is the increased focus on quality of life and wellness for seniors. Developers are expected to create communities with extensive amenities, such as fitness centers, social spaces, and integrated healthcare services, to meet the higher expectations of the ageing population.

As sustainability becomes a central concern across all sectors, the future of later living in Spain will likely focus on eco-friendly developments. Energy-efficient buildings, green spaces, and sustainable construction materials will be key components of future projects. Investors and developers will increasingly need to incorporate ESG principles into their later living developments to meet regulatory requirements and appeal to socially conscious investors.

Turning to France, are we seeing a similar situation?

In France too we are seeing a trend of people living longer and longer, and the proportion of the so-called third generation is becoming bigger and bigger. This demographic trend 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.

In France how marked is the distinction between the public and private offering? Is the main difference between the public and private sector for later living the type of asset considered by investors?

The offering made by the public sector is no longer regarded as suitable in terms of the expectations of the public: people of 60 and over are not in the same state of health as they were before. They are more and more active and independent, and they require bespoke accommodation. France's current housing stock is not really adapted to the needs of the elderly in terms of safety, layout and practicality.

The later living sector in France is 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. This led to the emergence of independent living residences to take into account the fact that those aged 60+ may sometimes be isolated and in need of something more in terms of facilities. 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. They are either reinventing themselves or offering modernised assets.

In France we are seeing that private investors and operators tend to be more interested in service 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.

In terms of co-living residences, these are a new form of inclusive living that offers both inclusive housing and a package of services and can take many different forms. In practice, the residents have their own private space and shared communal areas and can benefit from a number of a la carte services. There are currently two types of co-living for seniors:

• Co-living for seniors: cohabitation between people over 65 years of age;

• Intergenerational co-living: cohabitation between seniors, seniors and/or students and young professionals.

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. The operators, companies specialized in the management of healthcare establishments, take charge of all operations: staff management, maintenance of premises, relations with families, etc. Commercial leases with later living operators often have a relatively long length of 12 years, with anticipated renewal options, offering good visibility on future returns.

What about in terms of planning law in France, is the sector viewed differently to other residential development?

Under French planning law, residential accommodation relating to later living falls under sub-use number 2 “hosting”, which is a subdivision of use class 2 “housing”. This hosting sub-use is relatively wide and covers buildings intended for accommodation in serviced residences or hostels. This sub-use includes retirement homes, university residences, workers’ hostels and independent living residences.

Are there any top tips pertinent to France regarding selection of an operator?

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. We also see reporting obligations included in leases for the lessors to have a better understanding of the financial situation of the operator, such as providing yearly financial statements, occupancy rate, turnover, work statement of the tenant, etc. This way the lessor is able to monitor/control the future of the asset but also of the maintenance of the building.

The reputation of the operator is especially important in France, especially given that there has been some recent bad press relating to the retirement home sector. The press is very keen to publish information on establishments which are closed or administered (through an order) by the Regional Health Agency. 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.

The ability of the operator to comply with the lessor’s ESG requirements and ability to put in place internal control rules is also an increasingly important consideration for any investor in this sector.

Next steps

If you were unable to make the event 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 Stella Bliss and Ingrid Stables.