Approximately €515m was invested in European senior housing assets in H1 2020, an increase of 25% year-on-year as the sector’s long-term fundamentals are proving its resilience despite Covid-19, according to Savills. Over the past five years, investment activity in the sector has been mainly concentrated in France and the UK, together accounting for 68% of the share (38% and 30% respectively), followed by Italy (9%), the Netherlands (7%), Sweden (5%), Germany and Belgium (4% each).
Lydia Brissy, Director European research at Savills, said: “During the first half of the year, cross border capital accounted for 64% of all senior housing investment, a record high in a sector that is traditionally led by domestic investors. Cross border investment still comes predominantly from Europe, notably from France, the UK and Sweden. However, US investors, who have invested heavily in both the student housing and multifamily sectors, are increasingly looking at the potential of senior housing.”
Prime senior housing yields currently range between 3.5% and 5% for operating assets, depending on the country, location and quality of the properties. Increased appetite from investors for senior housing has put downward pressure on prime yields over the past few years. Yet, on average, the yield discount that senior housing offers over other asset classes ranges between 96bps over prime multifamily and 88bps over prime CBD-offices.
Marcus Roberts, Head of Europe, Savills Operational Capital Markets, commented: “The amount of capital targeting senior housing assets has remained relatively unchanged since the beginning of the year and we expect investor interest in the sector to remain solid in the coming months. Due to a limited supply of operational assets, changes in regulations and market consolidation due to Covid-19, we expect opportunistic investors to enter the sector and an increasing number of investment deals to be driven by the forward funding of development opportunities.”