Ahead of the Retirement Living and Care Homes UK conference on December 4th we sat down with Verity Knight and Anthony Oldfield of conference sponsors JLL to discuss the current state and prospects of these sectors. Verity shared her expertise on the Care Home market and Anthony on Retirement Living…
Q1: What’s the current state of the care home and retirement living sectors?
Verity:
The care home sector is seeing exceptional levels of capital inflow, with total healthcare investment volumes approaching £10 billion so far this year and a further £2 billion anticipated before year-end. This is nearly triple the 2024 figure and significantly above the five-year average. Much of this momentum is being fuelled by major US real estate investment trusts (REITs) such as Welltower and Omega, who are drawn to the sector’s resilience during economic uncertainty. Operationally, operators have shown remarkable resilience, and constraints on new developments have exacerbated the supply demand imbalance which in turn strengthens the position of existing stock.
Anthony:
In contrast, the retirement living market is still maturing and has faced a slower year, largely due to a sluggish residential property market and ongoing economic headwinds. However, there have been significant moves, such as the merger between Audley and Elysian, which will create a platform of 26 operational villages. This year has been more about laying the groundwork for future growth, with expectations of increased activity in 2026.
Q2: How are investors approaching these sectors, and what trends are emerging?
Verity:
Investor sentiment remains positive , especially among international players. North American capital has played a major role in recent UK deals, with Welltower acquiring several leading operators and Care Trust REIT making a notable entry into the market with their acquisition of Care REIT plc (formerly Impact). Omega along with Foundation Partners and Deer Capital are also doubling down on the sector.
US REITs are increasingly adopting more flexible ownership models, enabled by RIDEA legislation, which allows them to acquire wholcos and be more hands-on with operations. The rise of management contract structures—long established in the hotel sector – has enabled investors to boost returns by being more directly involved in driving efficiencies through consolidation and integration of tech initiatives.
Investors are showing interest across the full spectrum of the market, from premium assets to more secondary stock, but we have witnessed a growing appetite for mid-market opportunities that offer potential for refurbishment and repositioning. An example of this and a key highlight for the JLL team was acting for Fraklin Templeton on the acquisition of the LDC portfolio, a portfolio of 32 care homes which were formally leased to Four Seasons before they were transitioned to six alternative regional operators.
Demographic fundamentals continue to underpin the investment case: the number of people aged over 85 is set to rise sharply by 2050 as the baby boomer generation reaches 80 years of age, ensuring ongoing demand for care services. At the same time, viability challenges and limited new development has created a supply-demand imbalance, which benefits existing operators. ESG (Environmental, Social, and Governance) considerations are also increasingly important, with investors attracted by the sector’s strong social impact credentials and opportunities for sustainable refurbishment.
Anthony:
Investors remain positive about the retirement living sector but there has been limited investment activity this year. There are a number of large processes ongoing/ under offer which highlight the strength of demand in the sector- two of these are being undertaken by JLL – one is the largest retirement rental portfolio in the UK and the other a mixed tenure portfolio where bidders are looking to pivot it to a rental model. These transactions will be the start of many more to come over the next few years and shows that investors continue to focus on long term income and remain keen to back the right opportunities.
Q3: What’s needed for Integrated Retirement Communities (IRCs) to achieve scale, and is the business model fit for purpose?
Anthony:
The retirement living sector is moving towards two dominant models:
- Compact, urban schemes focused on rental tenures
- Larger, lower-density villages in rural settings, typically for sale with deferred management fees
Achieving scale will likely depend on further consolidation. At present, McCarthy Stone is the only major player with significant operational scale, while others remain relatively small. The recent Audley-Elysian merger is a sign of things to come, and more mergers and acquisitions are expected as the sector matures. This consolidation will give both investors and operators greater confidence, as it creates clearer exit routes and opportunities for growth.
Q4: What lessons can IRCs take from the care home sector’s success?
Anthony:
Three key takeaways stand out:
- Needs-Driven Approach: Care homes have thrived by focusing on essential needs, providing services for those who require support the most. IRCs should move beyond being seen as a lifestyle choice and instead address the needs of older people who aren’t ready for a care home but can’t manage alone.
- Stable Income Streams: The sector should prioritise predictable income, such as rental payments, rather than relying on the ups and downs of the property market. This approach is more attractive to investors and aligns IRCs with other residential sectors.
- Mid-Market Focus: Care homes have succeeded by catering to the mid-market. Retirement living providers who can make mid-market schemes viable have seen strong uptake, both in sales and lettings.
Q5: What’s the outlook for rental-based retirement living?
Anthony:
The future looks bright for rental models in retirement living, which are expected to become a major part of the sector. Some of the most successful portfolios are already rental-based, meeting the growing demand from older people who value flexibility and a stepping stone between their own home and a care home. Rental models offer investors quicker returns and more certainty, while residents benefit from greater flexibility. Leading operators like Moda and Birchgrove are pioneering these approaches, and rental is seen as a promising way to address the mid-market opportunity.
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Want to hear more from Antony and Verity? Both are key speakers at our conference on the 4th of December. Don’t have your place confirmed? There are still some spaces available so if you’d like to reserve your place just head along to: https://www.carehomesconference.com/