_The Lone Star deal signals a new era for Seniors Housing

The investment case for seniors housing has been building rapidly in recent years, while Covid-19 has reinforced its resilience. Operators within the sector were quick to react, successfully managing Covid-19 pandemic with effective infection control and safety management

January 31, 2021

This success has been a contributing factor to increasing interest in the sector, as evidenced by the bumper year for the investment we saw in 2020, with £1.3 billion of capital flowing into the sector – a record year for investment into the sector.
For years, the sector has been growing in maturity but was still in its relative infancy when compared to more established asset classes such as student accommodation and PRS.

Now, however, Lone Star’s acquisition of McCarthy & Stone marks a highly significant turning point in the trajectory of the UK’s Seniors Housing market. It is the first major portfolio deal for the seniors housing sector and is being closely followed by Carlyle’s acquisition of Beechcroft – clear signs that the sector is becoming increasingly established.

Moving forward, we expect to see the volume of capital committed to seniors housing increase, along with more investment from outside investors looking to broaden their exposure in search of portfolio diversification. Lone Star’s acquisition has provided insight and confidence for other investors to enter the sector; where they have gone, others will surely follow.

Indeed, recent research by Knight Frank found that currently, only 13% of investors are active across all three major residential investment asset classes – student accommodation, seniors housing and PRS. This is set to rise to 38% by 2024.

Investment from institutions is driving the market forward, and as a result, we are forecasting huge growth over the next five years – with investment rising from £39 billion in 2019 to £55 billion by 2023. The seniors housing rental market in particular looks set to thrive, with a projected growth rate of 160% of total stock over the next five years.

Large portfolio deals are a clear indicator of a rapidly maturing market. With the seniors housing sector growing at pace, Lone Star’s acquisition of McCarthy & Stone is the starting gun for a new era.

Tom Scaife is Head of the Seniors Housing team at Knight Frank, which was the real estate advisor for Lone Star on the McCarthy & Stone portfolio acquisition.