The virtuous circle of investing in an ageing society

This article first appeared in Portfolio Institutional.

It’s no secret that the UK population is ageing. According to the latest figures from the Office of National Statistics (ONS), a fifth of the UK population is now 65 or over. This age group is expected to grow four times faster than the general population over the next five years, as people live healthier lives for longer.

Though this is undoubtedly a good thing, a major demographic shift of this kind will inevitably have some challenging consequences. Nowhere is this more apparent than with the final-salary pensions schemes struggling to plug deficits which are, in part, being widened by increasing longevity.

In an age of low-interest rates, finding assets which have the right risk-return profile to match the increasing life-expectancy of members is a challenge. But, increasingly, many pension funds – both in the UK and internationally – are recognising that there is another side to the coin, and that an ageing society presents not just an investment challenge, but also an investment opportunity.

To understand this, it is important to consider the underlying drivers of the UK retirement property market. In 2009, the Department of Health commissioned a report to consider the housing needs of an ageing population. It determined that innovation in retirement living was a national priority and that retirees should be provided with better choice through a greater range of housing opportunities.

Research conducted by Knight Frank last year found that a quarter of over-55s would consider moving into purpose-built retirement housing in the future, representing a pool of demand of nearly two million homeowners. Yet, the same research found that private retirement housing accounts for only 0.06 per cent of all dwellings in the UK.

This was reinforced by our own Octopus Healthcare research which found that over two-fifths of people aged 65 and over believe there is a lack of suitable properties to downsize to.

With an emerging pool of demand representing £820 billion of property wealth, and a chronic undersupply of suitable real estate, the need for investment into the UK retirement property market – both in the form or retirement villages, care homes and even GP surgeries –  is vast, but so too is the opportunity.

It is this level of sustained and increasing demand, combined with stable, long-term indexed-linked income profiles and favourable pricing relative to alternative sectors, that makes retirement property an increasingly attractive opportunity for institutional investors.

In many ways, it’s a virtuous circle – pensioner money funds improved living conditions in retirement, and the associated income stream goes back into the pot to match the scheme’s liabilities.

The benefits could also go beyond the scheme and members. Freeing up the housing stock held by retirees could, by some estimates, lead to nearly 8 million bedrooms becoming available and would go a long way towards addressing the UK’s housing shortage.

When it comes to an ageing society, challenges are often cited. But increasingly, the benefits for investors, retirees and society are being recognised, and institutional investors are at the forefront of turning this challenge into an opportunity.

Visit the Octopus Healthcare website to find out more.

Support for special educational needs and disabilities

Investing in people

At Octopus Healthcare, we’re not just investing in buildings and businesses, but people and their futures.

The companies we invest in share our vision.  One such company is the Aurora Group, a specialist provider for children, young people and adults with special educational needs and disabilities (SEND).

SEND is a term describing the needs of a child who has a difficulty or disability that makes accessing learning harder for them than other children of their age. Needs cover everything from specific learning difficulties such as dyslexia to profound and multiple learning difficulties.

SEND affects many lives: approximately one in five children will have SEND at some point during school years (BBC archives, DfE SEND Code of Practice). Currently 1.2 million children have SEND, constituting 14.4% of the school age population (UK Government).

In supporting a child with SEND, families can obtain an education, health and care plan that is legally binding.  However, SEND remains an underserved area. Funding cuts and policy reforms have made navigating the UK’s education, health and care systems extremely challenging for all involved.

The work of Aurora

Since launching in 2015, Aurora has made great progress in working to meet the needs of children and young adults with SEND.  The company has grown from a team of eight to 860, with nine operational schools, two Further Education Colleges and two adult care homes across the UK.  Funded by local authorities, these support 485 children and young adults.

The Aurora team works not just to provide care and support but to encourage, develop and celebrate diversity, and ultimately to empower uniqueness in every individual in their services.

The company is named after the Aurora Borealis or Northern Lights. As a natural phenomenon, these only come together when all the right elements are in place. Similarly Aurora is focused on ensuring that the right elements, including education, care and therapy, are in place to help people grow in their own unique and inspiring way.

Outstanding care, outstanding results

Aurora’s Orchard Manor, offering a living and learning environment for young adults with severe and complex learning difficulties, was awarded its second ‘Outstanding’ rating from the UK’s Care Quality Commission in 2017.

The accreditation is rarely given, with just 2% of UK adult social care services receiving it in the last 12 months (Learning Disability Today, 2017).

However, the team is not resting on its laurels but focused on continuous improvement. Aurora’s culture is one of transparency, trust and learning, including strong leadership and teamwork, with extensive induction programmes to ensure that all staff deliver the highest standards of care.

Staff commitment is borne out in their words. In a recent blog, Cathy Rundell, Service Manger at Orchard Manor, wrote about a new arrival who had previously spent six months in hospital with his mother by his side.  Concerned about separation anxiety, the team was thrilled that, “He’s settled fabulously and hasn’t stopped laughing since he moved in. Now that’s outstanding.”

New buildings for new opportunities

Similarly, Aurora Brambles in Leyland, a specialist school for boys with needs related to social, emotional and mental health issues, benefited from a state-of-the-art building created by Aurora, opened in September 2017.  It allows the school to support more pupils, now catering for 80 boys aged 9-16.

In an article, Headteacher Dan Creed discussed how the building boosted the school.  He emphasised that, “For many students who come here they may have felt rejection and misunderstanding in previous placements.  So, it is mine and my team’s aim to never give up on anyone who comes to us.”

Living, learning and the workplace

Aurora also helps those in the workplace. Through colleges and placements, including at Aurora Boveridge College and Foxes Academy, it supports adults with SEND in forging careers.  Activities include supported internships and apprenticeships, equipping people with practical skills and giving them deserved opportunities.

In November 2017, Foxes Academy students were part of an event organised by charity Springboard to promote people with learning disabilities working in the hospitality industry.

Tracey Clare-Gray, Principal of Aurora’s Foxes Academy, reminded people that, “Disabled employees stay in a job for longer, have good punctuality records and low absentee rates.  Loyalty, talent and enthusiasm are among the many assets they bring.” (The Caterer, 2017)

As Aurora supports many unique and inspiring people, we are proud to support them.  Aurora helps people to realise their potential and move their lives forward. In turn we celebrate their work in making a difference, and changing lives for the better.

A big thank you to all healthcare professionals at Christmas

For many people visiting the NHS over the Christmas season, feeling festive is the last thing on their minds. Diagnoses of illness, long term health conditions and age-related frailty sadly don’t take time off over the festive period.

For healthcare staff, it’s business as usual throughout December, in fact it’s one of the busiest times of the year with demand for healthcare services peaking in the winter months.

Across the healthcare service many people will be working over Christmas and New Year: 12,000 midwives will be on duty for babies being born on Christmas Day, another 97,000 nurses and 53,000 healthcare assistants will be working on the 25th December along with 200,000 care workers across the UK.  For GP surgeries the run up to Christmas and the days between Boxing Day and New Year’s Eve can be very intense.  At a time when the rest of the population is winding down and relaxing, practice staff are busy with calls from patients.

Healthcare professionals from all different teams and areas of expertise dedicate their Christmas to helping others, and for that we’re very grateful.  So to them, we wish a Merry Christmas and a happy new year, but most of all, we’d like to say a big thank you!

 

A brighter future: primary care investment provides long-term savings

Our ageing population is set to cost healthcare providers a staggering amount in the next 10 years, with a predicated increase of 25% in those who will need care between 2015 and 2025. According to research published by the Lancet Public Health Medical Journal, within eight years, there will be 2.8 million people over 65 needing nursing and social care, unable to cope alone.

This upwards trend in our ageing population is set to continue for many decades, but investment now can drive savings in the future.

What investment in primary care is required?

The most effective cost savings can be made when proactive measures are put in place to improve patient outcomes and slow down or reverse chronic decline.  By doing so, older people will put less strain on the acute services treating chronic disease and delay the need for nursing or social care in specialist units.

Overall, around 90% of patient interaction is with primary care – GPs are generally the first port of call for treatment of conditions and ailments.  However, in some cases older people are bypassing these services when age-related conditions go unidentified.  For example, loss of muscle mass and issues with mobility may result in serious falls that require emergency hospital treatment.  Following a health crisis like this, the patient can become increasingly dependent and more susceptible to chronic conditions that require expensive acute services or nursing care.

Investment in primary care creates opportunities to put in place the infrastructure necessary to support patients, by screening for age-related conditions (the markers for more serious and long term problems), before they enter the ‘dependency zone’.  Providing therapies in primary care settings is an effective way of delaying these problems, for example by offering cognitive therapies that can delay or even stall the onset of dementia.  With this support, older people can continue to live in their homes or in retirement communities for longer, enjoying a better quality of life and overall better health.

While there is immense pressure on GP services, primary care centres with supporting services under one roof – e.g. dental practices, community pharmacies, optometrists, nutritionists, mental health services etc. – can actually help alleviate this pressure.  Patients can be easily referred to these services, avoiding trips to hospitals or other providers and awareness of preventative therapies and services will also increase.  At the same time, awareness of age related issues also increases, thereby offering an early warning of potential  chronic conditions,.  Older patients or their families, who might not have thought to tell their GP about issues with mobility, depression, visual or audio impairment etc., may ask for help earlier instead of only seeking treatment when conditions have worsened or there is a health crisis.

Where should investment be made?

A significant barrier to this vision of a holistic primary care service is the existing primary care estate.  Many GP practices are in premises that are unfit for purpose,  struggling to meet demand for general practice services, let alone accommodate a wider range of services.

However, there are some excellent examples of what primary care could look like. With private investment some GP practices have moved into new, state of the art premises as tenants, with where they have the space to provide more services under one roof. In doing so they have also solved the key problems facing many GP partners of recruitment and the issue of releasing equity when partners wish to retire.

Other primary care centres have used private investment to refurbish and extend existing properties, such as Robin Lane Health and Wellbeing Centre in Pudsey, Leeds.  With investment through the MedicX Fund, the property was acquired by Octopus Healthcare and an extensive redevelopment project completed that included an additional eleven consultation and treatment rooms.  This outstanding primary care centre is now meeting its goals of providing more services in the community and in turn driving savings in healthcare for the long term.

For more examples of how we’re working with primary care providers, click here.

The role of primary care in supporting the elderly 

By the time many elderly people seek treatment for a physical or mental incapacity, they are set on a course for a steady decline in their health.  At this stage clinical treatment to help patients manage chronic health conditions may be all that’s available.

The World Health Organisation in the recent publication Guidelines on Integrated Care for Older People put the focus on early intervention; exploring how a holistic approach to ageing and associated health impairments can prevent, slow or reverse declines in physical and mental capacities among older people.

Instead of waiting for patients to present with a chronic disease and treating that in isolation, it’s about identifying declines in ‘functional ability’ and ‘intrinsic capacity’ that are often a precursor to more acute healthcare issues.  These include a decrease in muscle strength, weakening eyesight, problems with mobility and cognitive impairment which can be early markers of declining health.  When treated or monitored early, older people may be able to live healthier and better lives, and in turn reduce the burden on healthcare providers for acute services.

The new guidelines provide evidence that it is in primary care where there are opportunities to improve the long term health of older people; by addressing the comprehensive needs of patients rather than the conditions and complaints for which they seek treatment.

Getting the primary care infrastructure right

However, with many primary care providers overstretched and understaffed, how can GPs and community healthcare teams do more than treat the conditions they are presented with?  WHO are calling for better integration between care providers, for example by providing more healthcare services in the community.

Recommendations include the following:

Mobility loss: multimodal exercise (strength resistance training, as well as flexibility, balance, and aerobic exercise).  Some primary care providers are facilitating this with on-site exercise classes and by partnering with other healthcare providers.

Visual and hearing impairments: routine screening for visual and hearing impairments are best delivered in a primary care setting where older people are more likely to use these services.

Cognitive impairment: referrals to on-site cognitive stimulation therapies have the potential to delay the onset of dementia and even reverse declining cognitive capacity.

Depressive symptoms: depression is associated with a severe decline in functional ability among older people.  Interpersonal therapy and cognitive behaviour therapies can be delivered in primary care settings.

There are clear benefits for older people if these services are delivered in primary care settings.  Firstly, awareness will increase and therefore those on the frontline of primary care will be more likely to refer patients for additional support.  In their guidelines the WHO do highlight the need for more awareness and training to help healthcare professionals identify the declines in intrinsic capacity and functional ability, having services on-site will put these at the heart of care for older people.

Moreover patients are more likely to use these services when delivered in the community, rather than in hospitals or through off-site providers.  Instead of waiting until their condition deteriorates patients may also seek help earlier owing to increased awareness around these key issues; families too will be more aware of the support that is available for older patients.  Primary care premises become a hub for all supporting services, increasing access by providing services close to where older people live.

Improving primary care premises and building purpose built primary care hubs, can help to create better integration between care providers.  Here at Octopus Healthcare we are involved in a number of primary care centre projects with the aim of increasing healthcare services in the community.  For an insight, read our recent case study on the Mullingar Primary Care Centre here

Technology in healthcare

Our focus on customers means we support not only the premises in which we invest but positive developments for health overall. This includes technological advances bringing the potential to transform healthcare, with benefits for patients, clinicians and the sector.

We know that technology is integral to the spaces we focus on, from planning and design to execution and delivery. Alongside improving care, technology can aid security, accessibility, connectivity, communication and efficiency, helping to promote health and wellbeing.

Technology can enhance the lives of those who populate new buildings and complexes. Octopus invests in the future. Our starting point is the physical environment, built around the care that patients will need tomorrow. Health tech is key.

Health tech

Technology is ubiquitous within health. Healthcare trackers, as apps or wearable devices, monitor aspects from fitness to fertility. Artificial intelligence facilitates research, drug development and data management. Virtual and augmented reality helps in training clinicians and preparing patients for surgery through 2D and 3D visualisations.

Within health communities like retirement villages, fusing technology with design means that ambient and voice recognition technology can be built-in, with tailored connectivity for going online becoming standard. Advances in robotics mean that in future robots could perform care tasks.

So technology is already being used in specific and specialised ways. Yet there is a contrast between its presence in niche applications and its absence from the everyday management of health by individuals and communities.

Health and the healthcare system are difficult for people to manage within busy lifestyles and tight budgets. People generally attend to their health on an ad hoc basis, book appointments over the phone and usually have face to face appointments.

Similarly, stretched and underfunded organisations often use outmoded or antiquated systems. Despite advancements in health tech and initiatives to apply these, processes remain fragmented.

The need for transformative applications

People now manage many elements of their lives, from their finances to free time, through their phones and other devices. It’s clear that they need a similar level of convenience for managing their health.

Health-centred communities also require solutions to ensure smooth running of operations. If the technology exists to manage central heating from a phone, an expanded equivalent could cover health management networks within these communities.

The need for technological innovation is underlined by socio-economic factors. Increased life expectancy has resulted in an aging population. The UK population is at its largest ever with nearly 20% aged 65 and over, and the old age dependency ratio increasing. (Office for National Statistics, July 2017).

This is set against continued health cuts and an overburdened healthcare system. Hospital waiting lists have more than doubled, with over 500,000 people waiting for operations currently. (BBC news, October 17, 2017)

There is an urgent need for applications to help manage health effectively. It can be argued that the sector is due a full-scale technology overhaul, with the aim to create a patient-controlled pathway for each life stage.

Benefits of technology for health

Any app that can sync individual needs with healthcare requirements could be a powerful tool. The right technology could enable people to take greater control of their health earlier on, centralising information, delivering education, and allowing for a holistic, long-term view.

Placing health in people’s hands could lead to a democratisation in healthcare, with people empowered by the ability to self-serve, an improvement on dismay at divisions between public and private healthcare.

Greater autonomy could also constitute a preventative approach, raising awareness; decreasing fears around illness and aging; and transforming doctor-patient relationships. This would introduce greater efficiencies and reduce strain on the sector.

Commitment to technology in the healthcare environment

For over a decade, Octopus Healthcare has invested in healthcare infrastructure through supporting businesses, partnerships and developments. We have made investments totaling £1 billion in all aspects of the patient experience, from GP surgeries to retirement villages.

We work to devise new ways of joining up the physical environment, for example co-locating primary care on the same site as a hospital, care home and other services. Our aim is always to create health destinations combining technological innovation and clinical knowledge, where people live rather than just stay.

Our sister company Octopus Ventures is a London and New York based venture capital firm, focused on identifying unique and ambitious entrepreneurs.  The team invests from £250,000 to £25 million in seed to series B funding and looks to follow in subsequent rounds. Their portfolio of healthcare investments includes myTomorrows and antidote, platforms for finding clinical drugs and trials; Medisafe, helping millions of people worldwide to take their medications as prescribed; and Big Health, offering online mental health services.

Our teams are highly receptive to new ideas and approaches, driving change and improvement as we invest. Our place within the Octopus Group means we can often provide routes to funding. With technology being so important to health, we welcome innovation in this area and look forward to continued dialogue with health tech entrepreneurs.

The Baby Boomer Effect: A Retirement Housing Opportunity

The UK retirement market presents some exciting opportunities for investors who want to be part of a booming housing sector.

The Baby Boomers are reaching retirement and they want to grow old in a different way to their parents’ generation. A sedentary lifestyle living in retirement housing or care homes out of sight and out of mind is not for them. They want high quality housing solutions that allow them to continue their active and comfortable lifestyles, playing their part in the local and wider community.

This demographic has high expectations and wants to live independently and enjoy retirement for as long as possible. Yet there is a significant shortfall of housing for this group. Only 2% of the UK housing stock is designated as retirement housing, and only a small percentage of that meets the demands of this new generation of retirees.

Octopus Healthcare and property experts Strutt Parker, recently commissioned a report into the needs and desires of the UK’s retirement generation. Called Housing Futures: The Platinum Generation our research surveyed over 2,200 respondents aged 65 and over, and explored current provision, attitudes to retirement, barriers to downsizing / rightsizing, financial considerations and aspirations for retirement living.

As a result of our research we have identified a potential solution that we are calling Platinum Places: retirement housing fit for the Baby Boomers and future generations.

In this whitepaper we explore the opportunity for property developers, landowners and investors to meet the shortfall in this booming sector, and provide innovative solutions for today’s retirees.

Click here to read the full paper http://healthcarewhitepaper.co.uk/

Next steps for Sustainability and Transformation Plans (STPs)

The next few years are going to be an exciting time in primary care. Sustainability and Transformation Plans (STPs) are at the heart of changes that patients, GPs, practice managers and primary care commissioners have been wanting for years: a shift from acute hospitals to primary and community care.

The pressures on the NHS are well documented. Not least, people are living longer with more complicated health issues. They don’t necessarily need emergency care, but more often than not they end up in hospital receiving expensive care for health issues that potentially could be significantly cheaper to treat through primary and community care. Once in hospital it can be extremely difficult to get patients back home and into the care of their local communities.

We’ve been watching the STPs process with great interest, and from our conversations with many primary care professionals, we are seeing genuine optimism that STPs will deliver much better, local services for patients.

Challenges for STPs

However, the process hasn’t been without some significant challenges. Compared to when the GP Forward View was first published in October 2014, there has been a sharp decline in financial and operational performance and many are wondering where the funds needed to implement STPs will come from. Currently most of the additional funding identified in the 2015 Spending Review is being used to keep services afloat, not to deliver transformation.

What options are available for creating the healthcare infrastructure needed to deliver care close to home? How will primary care providers cope with a significant increase in services?

In the medium to long term, new care models have the potential to address financial and operational pressures. By increasing services delivered through primary and community care NHSE will save money; reducing expensive acute visits and reducing demand for services with early intervention. But investment is needed now to build the infrastructure to deliver financial and operational savings in the future.

While it is anticipated that under the STP process the level of spend will increase to about 11% of NHSE budget – more than a 50% rise in the amount of spend currently available – how will this money will be diverted from acute / secondary care to primary and community care?

A recent King’s Fund report analysing all 44 STPs, warns that without extra investment, moving care closer to home is not ‘credible’ when hospitals are already running at full capacity. That said, the report does state that ‘STPs offer the best hope for the NHS and its partners to sustain services and transform the delivery of health and care.’

Of course there are opportunities to press ahead by using resources that are already in the community more effectively. 50 ‘vanguards’ have taken the lead on the new care models and are already seeing results: including reductions in A&E use and unscheduled hospital visits.

STPs and healthcare infrastructure

Some infrastructure changes could also be implemented now. In fact, much of the planned changes to the delivery of services cannot be achieved without significant infrastructure redesign and development. Delaying this work could result in a deterioration of patient care as STP footprints transition to new care models.

In many cases, fragmentation of estate ownership is a barrier to the successful implementation of STPs. Most of the 44 STPs identify the need to improve facilities, or invest in new premises to deliver services.

As there is a significant push towards moving healthcare provision into primary care, General Practice estate is fundamental to the success of most STPs. However, GP estate is generally not owned by NHS organisations within STP footprints. Typically, premises are owned by the GP practice or leased from a private landlord; and funded by the NHS (General Medical Services – Premises Costs) Directions 2013.

With funding pressures, many STP areas are exploring alternative ways of funding GP premises, looking for healthcare investment from the private sector as well as the NHS England’s Estates and Technology Transformation Fund (ETTF).

Getting the infrastructure in place early will be a key factor in how healthcare professionals, and patients, adopt STPs and access new care models in the future.

Healthy New Towns – A Model For Private-Public Partnerships

The Healthy New Towns initiative (launched in March 2016) could be a role model of how NHSE meets the government’s Sustainability and Transformation Plans (STPs) requirements. With a focus on putting primary care into the heart of new communities, and helping people to live healthier lives for longer at home, Healthy New Towns tick many of the STP’s boxes.

One exciting element of this is private sector involvement and how both private and public sectors can partner to achieve these new initiatives.  With a focus on ‘designing in’ health and ‘designing out’ the obesogenic environment, developers can do more than provide affordable housing but also improve residents’ long-term health outcomes.

Challenges for STPs

The most significant challenge for the STP areas is finance. Since the GP Forward View was first published in October 2014, there has been a sharp decline in financial and operational performance and many are wondering where the funds needed to implement STPs will come from. Currently most of the additional funding identified in the 2015 Spending Review is being used to keep services afloat, not to deliver transformation.

In the medium to long term, new care models have the potential to address financial and operational pressures. By increasing services delivered through primary and community care NHSE will save money; reducing expensive acute visits and reducing demand for services with early intervention. But investment is needed now to build the infrastructure to deliver financial and operational savings in the future.

While it is anticipated that under the STP process the level of spend will increase to about 11% of NHSE budget – more than a 50% rise in the amount of spend currently available – how will this money be diverted from acute / secondary care to primary and community care?

A recent King’s Fund report analysing all 44 STPs, warns that without extra investment, moving care closer to home is not ‘credible’ when hospitals are already running at full capacity. That said, the report does state that ‘STPs offer the best hope for the NHS and its partners to sustain services and transform the delivery of health and care.’

A Great Opportunity To Get Healthcare Right

Much of the planned changes to the delivery of services cannot be achieved without significant infrastructure redesign and development. This is where the Healthy New Towns initiative is working well. While the fragmentation of estate ownership is a barrier to the successful implementation of STPs in many cases, Healthy New Towns can build communities around health and care services.

Partnerships between private sector developers and primary care providers are also helping STPs to navigate around funding pressures; and the Healthy New Towns initiative is demonstrating how this can be achieved. Already many STP areas are exploring alternative ways of funding GP premises, looking for healthcare investment from the private sector as well as the NHS England’s Estates and Technology Transformation Fund (ETTF).

I think that the ten Healthy New Towns demonstrator sites have the potential to provide STPs with a model of how to integrate health and care services into the community; and how public and private partnerships can both meet and reduce demand by providing sustainable health care solutions.

Octopus Healthcare – with our extensive experience of retirement, care, and GP property development – is a prime example of a private sector organisation working with the public sector to meet the challenges of providing health and care services in the local community. To find out more contact me on 0203 142 4829 or email tim.meggitt@octopushealthcare.com.

The Baby Boomer Effect: A Retirement Housing Opportunity

How investors can meet the high expectations for a new generation of retirement housing

Contents

  • Executive Summary
  • The UK Retirement Housing Landscape
  • Retirement Demographics and What They Want
  • Where To Build The Next Generation of Retirement Accommodation
  • An Investment Opportunity
  • Conclusion
  • Sources

Executive Summary

The UK retirement market presents some exciting opportunities for investors who want to be part of a booming housing sector.

The Baby Boomers are reaching retirement and they want to grow old in a different way to their parents’ generation. A sedentary lifestyle living in retirement housing or care homes out of sight and out of mind is not for them. They want high quality housing solutions that allow them to continue their active and comfortable lifestyles, playing their part in the local and wider community.

This demographic has high expectations and wants to live independently and enjoy retirement for as long as possible. Yet there is a significant shortfall of housing for this group. Only 2% of the UK housing stock is designated as retirement housing, and only a small percentage of that meets the demands of this new generation of retirees.

Octopus Healthcare and property experts Strutt Parker, recently commissioned a report into the needs and desires of the UK’s retirement generation. Called Housing Futures: The Platinum Generation our research surveyed over 2,200 respondents aged 65 and over, and explored current provision, attitudes to retirement, barriers to downsizing / rightsizing, financial considerations and aspirations for retirement living.

As a result of our research we have identified a potential solution that we are calling Platinum Places: retirement housing fit for the Baby Boomers and future generations.

In this whitepaper we explore the opportunity for property developers, landowners and investors to meet the shortfall in this booming sector, and provide innovative solutions for today’s retirees.

The UK Retirement Housing Landscape

Currently the UK retirement housing sector is made up of three different types of provision. These are:

1. Mainstream Housing

Mainstream housing consists of non user-specific houses, flats, and bungalows often adapted with age-friendly features.

For many retirees these properties are their primary homes that may no longer be ideal for retirement living. Retirees may wish to downsize or reduce the cost and effort of maintaining their property, but they lack suitable alternatives. In our survey we found that 42% of respondents believe there is a lack of suitable properties in the UK to downsize into.

Another significant barrier to moving out of their family homes is the image the retirement sector has. Only a fraction of the UK retirement housing stock caters for younger, more active retirees: just 1% of UK over 60s live in designated retirement accommodation, compared to 17% in the US and 13% in Austria.1

This trend towards continuing to live in the primary home is also having a negative impact on the rest of the housing market. With the Platinum Generation delaying downsizing, and thereby holding onto housing stock, there is less suitable housing for younger generations.

2. Specialist Housing

In the UK there is a small amount of retirement housing targeted at the over 55s to own or rent. The majority of this consists of retirement flats in developments with some onsite facilities and support services.

In recent years the number of retirement homes being developed has decreased dramatically, from 30,000 per year in 1980s to 8,000 per year today. This decline in new developments is creating the shortfall we are now experiencing, and this is a problem that can only get worse. Over the next 20 years the Baby Boomers will represent a large ‘bump’ in the ageing population. The Office of National Statistics2 predicts that by 2034 the over 65s will account for 24.3% of the UK population, compared to 14.9% in 1984.

With only 2% of the UK’s housing stock designated as retirement accommodation, there is a significant shortfall of suitable properties for retirees who wish to live independently but in accommodation specifically designed to meet their requirements as they get older.

3. Care Homes

Our ageing population is also driving demand for residential beds in both the private and public care home sectors.

However, demand for care homes has dropped within the ‘younger old’ demographic. Healthier diets, improved healthcare management, and more active lifestyles means that many retirees do not need specialist care until much later in life.

The care sector faces some significant challenges, with funding cuts, staff shortages and a long term trend of deregistrations and bed losses. With increased longevity combined with the Baby Boomer ‘bump’, demand for more beds will increase in the next 20 years as the ‘younger old’ become more elderly.

There are investment opportunities here, particularly in the mid and high end markets, building specialist purpose built care homes for wealthier older people who fall outside of state funded support.

Could Better Retirement Provision Reduce Demand For Care Home Beds?

Our report with Strutt Parker focused on people considering moving into retirement housing for the first time. The majority of respondents did not have a current need for a care home bed, and all wanted to forestall this eventuality for as long as possible.

However, 34% of respondents cited a ‘crisis event’ or needing more support as the biggest reason for moving into retirement accommodation. One of the key benefits of Specialist Housing is accessibility: with fewer stairs, level thresholds, and walk-in showers – all reducing the risk of falls.

This type of accommodation has the potential to allow residents to live independently for much longer, and therefore reduce demand for care home beds. However, it also needs be designed to promote longevity and wellbeing by encouraging activity, community involvement and reducing physical and mental health problems that might necessitate a residential home.

For investors this provides a great opportunity to provide the retirement generation with long term housing that reduces the burden on healthcare services.

Retirement Demographics and What Retirees Want

To meet the demand for retirement accommodation, developers, investors and operators need to address a diverse range of needs. While many retirees are fit and active, others have complex health issues and require very specific facilities and care.

In our report Housing Futures: The Platinum Generation we looked at ‘Retirement Tribes’ and identified six unique personas who are considering moving into retirement housing:

  • Blitz Kidz – Aged over 70, Blitz Kidz tend to be single (possibly widowed or divorced), without access to private pensions or income from investments, and are looking for a retirement product that they can rent. They tend to be lifelong renters, but if they currently own their own home they are not likely to benefit from a large equity release when the property is sold. This tribe holds traditional values and will often have a ‘make-do-and-mend’ approach
  • Peter Pans – Peter Pans are aged 60-65 and ‘kept up with the Joneses’ when they were working, but realise retiring from high-income jobs will restrict their accustomed lifestyle. While they have private pensions and investments, these are unlikely to fully fund their retirement, especially as they have a desire to help their children and grandchildren financially
  • Sundowners – Likely to be aged over 65, this tribe is probably retired but enjoyed a high household income while working and now have income from both pensions and investments. They also own their home outright. They have enjoyed spending on goods, services and family members but haven’t planned for their housing and care provision in retirement
  • Instagrammas – The Instagrammas (and Instagrampas) are socially outgoing and health conscious, not just concerning food but also when it comes to physical and mental fitness. They are attracted to technology and its benefits and would be considered early adopters for their cohort
  • Savvy Shrinkers – Aged over 70, this tribe are the true downsizers. They are practical, constantly in a state of decluttering and have always planned to move to appropriately sized accommodation as their circumstances change
  • Escalators – Likely to be single individuals, Escalators are over the age of 75 and seek a retirement village because of the services that it can offer. Whether it is weekly help with a grocery shop, or more personal needs, members of this group are beginning to require additional assistance, or recognise that they are likely to need extra support in the not too distant future

One of the headline findings from our report is that although 54% of respondents agreed they need to plan their care and support in later life, 73% of respondents have no plans in place for retirement accommodation or their care provision in later life. Moreover 45% stated they had no plans to move from their primary home, and 32% of respondents didn’t have a timeframe for downsizing or moving into retirement housing.

It would appear that in many cases, in part because of a lack of suitable accommodation, retirees would prefer not to think about their future needs.

Age Concern estimates that 25% of over 65s would be interested in buying a retirement property, but it needs to be the right kind of provision. These key barriers to making that move emerged from our survey:

  • 42% believe there is a lack of suitable properties in the UK to downsize into
  • 55% agree that retirement housing in the UK is not affordable
  • For many there is a lack of retirement housing in their area (location analysis of care homes shows that 31% of residents come from over 10 miles away)
  • The location of retirement housing is often away from local amenities leading to isolation and segregation (children today have a 5% chance of someone 65-plus living in their area, compared with 15% in 1991)

However, we know that high quality, aspirational retirement housing is in demand. The Platinum Generation want to downsize and move, but only on their terms. From our observations of the retirement marketplace, Octopus Healthcare sees this positive uptake every time a new development is launched on the marketplace that balances needs and desires. Properties are quickly occupied, and many existing retirement communities have closed waiting lists.

What Motivates The Platinum Generation To Move?

A ‘crisis event’ is often the trigger to move into retirement housing or add age-friendly features to mainstream housing – 34% of respondents cited needing more support as motivation for moving home – but our respondents also mentioned other reasons for considering a move. They include:

  • 33% seek lower maintenance – modern homes that require less upkeep, or developments with onsite maintenance are particularly attractive to older residents
  • 26% are looking for accessible homes – with level thresholds, fewer stairs and walk-in showers
  • 23% want a smaller house of two or three bedrooms which still provides space for hobbies, guests or storage
  • 22% wish to reduce outgoings – a recently built home will typically reduce outgoings by providing better insulation and energy efficiency compared with older properties
  • 20% seek a smaller garden – outside space is important, for relaxation or pets, but keeping it to a manageable size is crucial

We already know that the Platinum Generation have high expectations for retirement housing, they do not want to live in the same way their predecessors did. Many also have property, pensions and investments to fund their retirement, and intend to continue to enjoy a high standard of living.

66% of respondents in our survey plan to use profits from selling their primary home to fund their retirement accommodation and care. The over 65s own a combined £1.031 trillion3 of housing equity. They also expect to reduce their outgoings on the maintenance, repair and energy, by moving into smaller property or leasehold.

By aggregating our survey results, including expectations for retirement housing such as the type of property, services, local amenities and location, we have created a model for the type of retirement housing that meets the expectations of the Platinum Generation. We believe that the Platinum Places concept is a fantastic opportunity for developers, investors and operators, providing a new breed of retirement housing for a demanding and growing demographic.

What The Platinum Generation Wants

Common themes around independence, community, accessibility and wellbeing emerged from our research. Whether looking to own their own retirement accommodation, or to rent, the Platinum Generation wants to make a positive lifestyle choice when moving into retirement housing. The following wish list shares the key requirements that would attract the Platinum Generation into specialist retirement housing:

  • 86% believe that their privacy is essential
  • 73% want the freedom to come and go as they please
  • 71% would like to live where people help their neighbours and have shared tastes and interests
  • 70% would like help as they become less able to manage
  • 7% require extra room for guests
  • 67% want access to broadband
  • 66% would like to see 24-hour security
  • 61% would like private outside space
  • 6% are looking for a single storey residence
  • 48% would like an on-site café
  • 46% enjoy physical activity (e.g. golf, bowls, cycling)
  • 45% are looking for attractive buildings and grounds with modern facilities
  • 38% think communal gardens are a key feature
  • 37% need storage that’s easily accessible
  • 34% must have their pet living with them
  • 26% would like to have access to an on-site swimming pool
  • 11% enjoy having home comforts around them

Our research also suggests that as well as excellent services and facilities within a retirement development, the Platinum Generation also want to be part of the wider community and benefit from local amenities.

This requires developers, operators and local government to identify suitable land to meet the needs of the retirement generation on a local level.

Where To Build The Next Generation of Retirement Accommodation

There is a need for retirement housing with support and retirement housing with care. The Platinum Places solution focuses on providing aspirational retirement accommodation with support; with the objective of enhancing and prolonging residents’ active lifestyles.

The new retirement generation demographics clearly suggest that this is an opportunity for the private sector: for developers, investors and operators. But where should, and can, these new retirement communities be built?

Our research confirms a trend towards locating new retirement housing within the local community, as opposed to creating entirely new retirement communities isolated from the local population. The Platinum Generation wants access to shops, leisure and culture facilities, great transport links, and to continue to live meaningful lives in their local area.

Therefore the next generation of retirement housing, needs to be located within our villages, towns and cities: a significant challenge in already densely developed areas.

In our experience the most appropriate sites are surplus properties or land, brownfield sites or form part of a new multiuse development.

Surplus Properties And Land

With many buildings lying empty, both in public and private ownership, it is a logical step to build new retirement developments on this land. Examples of the type of site that makes an excellent location for retirement accommodation include: disused office buildings, pubs, surplus car parks, police and fire stations, private sports grounds, and even care homes.

Brownfield Sites

While brownfield sites have inherit challenges such as contamination, the investment opportunity presented by developing retirement housing on these sites surmounts many of the obstacles to development. Local authorities are also supportive of efforts to bring brownfield sites back into use; revitalising often rundown areas and reducing planning pressures on more sensitive greenfield sites.

Multiuse Developments

In line with the Platinum Generation’s desire to be part of the local community, not isolated living in retirement ‘ghettos’, is the opportunity to provide some small schemes within multiuse developments. The provision of retirement housing within other developments will, in many cases, assume some of the responsibilities of the local authority to meet housing need for older people in their areas.

Octopus Healthcare is working in partnership with landowners, developers, local authorities and operators to identify suitable sites and invest in the booming retirement market.

An Investment Opportunity

Octopus Healthcare believes that a new breed of retirement housing aimed at the Platinum Generation offers an exciting investment opportunity.

We are working with investors, developers and operators to meet demand for high quality, aspirational retirement housing in the heart of our communities. We think innovation schemes such as Platinum Places are the solution.

There is increasing government support for this type of development, and recent legislation has incentivised local planners to view planning applications more positively.

The Neighbourhood Planning Act 2017

On 27th April 2017 the Neighbourhood Planning Bill received Royal Assent and is now an Act of Parliament. The Act introduces for the first time a statutory duty on the Secretary of State (SoS) to produce guidance for Local Planning Authorities (LPAs) on how their Local Development Documents (LDDs) should address the housing needs that relate to old age or disability. The Housing Whitepaper states:

‘Guidance produced under this duty will place clearer expectations about planning to meet the needs of older people, including supporting the development of such homes near local services. It will also set a clear expectation that all planning authorities should set policies using the Optional Building Regulations to bring forward an adequate supply of accessible housing to meet local need. In addition, we will explore ways to stimulate the market to deliver new homes for older people.’

The Care Act 2014

Another significant piece of legislation that puts the onus on local authorities to address the needs of the Platinum Generation is the Care Act. The aim of the act is to, ‘to prevent, postpone and minimise people’s need for formal care and support… built around the simple notion of promoting people’s independence and wellbeing.’

This means that Local Authorities must ensure there are different types of retirement housing for the local population; especially housing that postpones the need for care homes and more specialist support. Moreover the focus is not just on the lower end of the market, but also ensuring the provision of retirement accommodation for more affluent retirees too.

Conclusion

The Platinum Generation is ready to move into retirement housing if, and only if, the provision meets their high expectations, needs and desires. The Baby Boomers have created a booming retirement market and now is the time to be part of this opportunity.

Octopus Healthcare is already investing in purpose built retirement developments with our partners; focusing on creating innovative accommodation for over-55s who are looking to downsize. These exciting developments will create community hubs that include restaurants, coffee shops, fitness studios, beauty salons and other communal facilities. Situated close to town and village centres, residents will also enjoy all the benefits of being part of the local community.

The powerful demographic trend of an ageing baby boomer generation makes investment in retirement housing a very attractive proposition. The sector is also not as exposed to economic forces, especially at the high end of the market, as residents typically sell their mortgage-free primary home to fund their retirement accommodation.

Investors who are interested in this opportunity should identify potential schemes for investment using the following criteria:

  1. A strong market with robust demand
  2. An experienced and innovative operator
  3. An operating strategy that addresses the high expectations of the Platinum Generation
  4. An attractive retirement development that will motivate the Platinum Generation to downsize

If you would like to discuss investing in retirement housing in more detail, please contact our team.

Call Mark Davis on +44 (0) 20 3142 4087 or email mark.davis@octopushealthcare.com.

For a copy of our report Housing Futures: The Platinum Generation please visit www.octopushealthcare.com/press-and-media

Octopus Healthcare is not a typical healthcare business: it is all about the long-term partnership approach. As specialists in healthcare, it invests in and develops primary care centres, care homes, retirement villages, private hospitals and specialist schools. Its vision is to improve the health, wealth and wellbeing of the UK population through the great environments it creates, the businesses it supports and its product innovations. As the adviser to multiple funds, it has invested over £1billion in healthcare assets and only invests in buildings and operators who share our values and are as obsessed with the patient experience as we are. Our flexible approach means we can provide funding to support delivery of more than just a building. We can work with operators to build businesses that will become market-leading companies in the delivery of better healthcare for the UK.

  1. www.demos.co.uk/project/the-top-of-the-ladder/
  2. www.ons.gov.uk/peoplepopulationandcommunity/
  3. https://www.ftadviser.com/pensions/2016/12/12/homes-earn-26-000-a-year-for-over-65s/

Octopus Healthcare
33 Holborn,
London
EC1N 2HT
+44 (0) 20 3142 4820
octopushealthcare.com