El Economista (Diego Bestard) · 25-04-2022
130 years ago, the first retirement pension of modern times was created in what is now Germany. The initiative of Otto von Bismarck, Chancellor of the German Empire, set the retirement age at 70 – not 65, as is commonly believed. At the time, the measure was a display of progressivism. Although most German workers reached the age of 70, not many were able to enjoy their retirement.
Things are very different today: we live much longer and also retire earlier. So, for the vast majority, old age is a flourishing new phase of life. Far from the pessimism of Philip Roth, who wrote in his novel Elegy that “old age is a massacre”, to so far surpass the age of 65 is one of mankind’s most meritorious achievements.
In Europe, around 21% of the population is aged 65 or over: the ratio is three percentage points higher than ten years ago. In Spain, the population over 64 in January 2021 was 9.4 million people, having increased by more than two million since 2002. Unsurprisingly, this demographic sector is making its presence felt in more and more areas of the economy. This is also the case in the real estate sector, which we at Urbanitae follow very closely.
Senior living or senior housing is beginning to sound strongly in the forecasts of all real estate experts. What are we talking about? In essence, housing solutions designed for people over 65 years old who retain their full autonomy. The consultancy firm Savills breaks down the concept into various categories, depending on whether the projects are developed through a cooperative (senior cohousing) or a developer (senior coliving); or whether they are more holiday accommodation (senior resort) or offer basic medical services (serviced flats).
Spain, a ‘senior living’ powerhouse
In its 2021 outlook report, CG Capital Europe predicts “high growth expectations” for the sector in Spain. Among the reasons, it highlights the ageing and declining population; the lack of beds to reach the minimum of five per 100 over 65 recommended by the WHO (74,000 missing in Spain, although Colliers raises the deficit to 200,000), and the high quality of life in Spain.
In Europe, during the first half of 2021 alone, investment in senior living and retirement homes exceeded 4,000 million euros. This is, according to Savills, a record level 38% higher than the previous five first halves. The pandemic did not have a significant impact, with transactions reaching €7.5bn, only 4% lower than in 2019, the peak year.
The UK and Germany lead the way in attracting investment. However, Spain’s interest has grown rapidly, along with countries such as Italy and Sweden. In addition to market criteria, claims such as being the healthiest country in the world, according to the Bloomberg Global Health Index, or the ninth best destination in the world for retirement, according to the World Economic Forum, come into play.
In the field of retirement homes, investment in Spain grew by no less than 325% in 2021, reaching 1.2 billion euros (almost double that in 2019). Yields, according to CG Capital Europe are between 5.5% and 5.75% in the last quarter of last year. With a yield of 5.75%, Madrid is, in fact, one of the best performing European cities, according to Savills Research.
The outlook is therefore very optimistic. According to a recent EAE Business School report, the senior living sector will increase its market share by more than 10%, to over 30%, in the next 30 years. Projects such as Las Arcadias El Encinar, by the developer Layetana Living, is a good example of what the sector has to offer: one and two-bedroom flats with all kinds of services, close to La Moraleja,
At Urbanitae we are well aware that alternative real estate assets – such as storage, data centres or build to rent – offer good investment opportunities. Although we have studied some proposals, we have not yet financed any senior living projects, but we are convinced that, like retirement, it is only a matter of time.
