Europe's senior housing market sees explosive growth - RCA

Europe’s market for senior housing and care home properties is experiencing strong growth as specialist US REITs target the region for its attractive prospects, new research by Real Capital Analytics shows.

A total of €644 mln of transactions took place in the first quarter in Europe, a 36% increase from a year earlier, according to the report.

This has lifted the amount of investment in the region's senior housing and care home sector to €9.65 bn since the start of 2012.

US investors, including Health Care REIT and NorthStar Realty Finance, accounted for 71% of the investment volumes over the past three years, RCA estimates.

Simon Mallinson, RCA's managing director for EMEA, said: 'US specialists have identified the opportunities arising from the long term needs of Europe’s ageing population and are busily assembling property portfolios of scale. They are helping Europe build something that is already a well­-established niche sector in the US real estate investment market.'

By 2035, the European Commission estimates that at least one in four inhabitants of the European Union will be 65 years of age or older, whereas in 2013 the proportion was 18.4%.

The Commission’s projections indicate that the growth in the number of people over the age of 80 in the EU will be particularly rapid, rising from 5% of the population two years ago to 10% in 2045.

In Germany, where the ageing of the population is particularly pronounced, the over 80s made up 26% of the country’s retiree population in 2013 and will rise to 34% in 2040. The EU's most active market for senior housing and care homes is the UK, reflecting its popularity with US investors as the bridgehead for their European expansion ambitions.

US investors have acquired properties, operators or entered sale and lease back arrangements with large care home operators. Recent notable transactions this year in the UK involving US capital include Heath Care REIT's £130 mln purchase of 10 properties located around Birmingham; Formation Capital and its partners' purchase of Meridian Healthcare, an operator of 30 properties in northwest England for over £100 mln; Ventas' acquisition of five assets in Southern English counties of East Sussex and Kent for £50 mln.

The UK registered €1.97 bn of property trades in the 12 months ending March 31, 2015.

Elsewhere in Europe, one of the largest deals was Residenset's purchase of 124 assisted living care facilities spread across Sweden from a fund advised by Sveafastigheter for €80 mln.

Pricing of assets settled at an average net initial yield of 6%, which is comparable to the 5.8% average for European residential assets, a sector which has also attracted strong inflows of capital from investors seeking “alternative” property assets to office, retail and industrial real estate.