The German senior housing market needs to open up to foreign investors, experts agreed at Real Asset Media’s German Senior Living briefing, which was held online recently.

“The need is great, there is a lot of growth to come and the market has depth and maturity,” said Frédéric Dib, president, Mozaic Asset Management. “Currently it’s dominated by domestic investors, but it needs to open up to international investors to meet the huge demand.”

The attractions are the demand/supply imbalance and the growth potential, but also a prime net yield of 4.5% for senior living, compared to 3.9% for logistics and industrial assets and 3.1% for offices.

The German senior housing market is considered to be more attractive in terms of prime net yield than the majority of other mature markets, such as France and Sweden, both at 4.2%, and Norway and the Netherlands, both at 3.5%, according to a new BONARD report.

Demographics ensure that the ‘sky is the limit’

“I am very bullish about the market,” said Alexander Hubbard-Ford, managing director, Terragon Residenz Invest. “Given the demographics, the sky’s the limit.”

The market is also dominated by non-profit organisations, with only 30% of assisted living residences operated by private companies. In Germany’s top 20 cities, the provision rate is 1.3%.

“High levels of income and disposable financial means drive the demand for privately-owned residences,” said Julia Momotiuk, senior research manager, Bonard.

The average monthly rent for a one-bedroom apartment in a private commercial serviced residence is €1,283, according to the Bonard report. However, prices vary considerably in the 20 cities examined, from a high of €2,667 a month in Munich, to €474 in Duisburg, although some places include meals, utilities and other services.

Germany’s affluent pensioners value their independence

“German pensioners are very affluent, have a strong sense of independence and want to stay in their environment, even in their neighbourhood,” said Hubbard-Ford. “Facilities have to adapt to their expected longer life-span but also to their lifestyle, and we try to meet that need”

The residences have boutique-hotel-like reception and communal areas, services including trips and medical assistance but also swimming pools, fitness facilities and other amenities to combine assistance and independence, he said.

“The independent senior living segment of the market is not regulated and not subsidised, and we hope it stays that way,” said Hubbard-Ford. For that reason it is more likely to attract private investment from domestic as well as foreign institutions.

When it comes to nursing homes, investors must be aware of how the market is organised and regulated in the federal system. “It is complex because each Land in Germany has its own laws, so operators have to wade through a jungle of rules, which can be very specific and push up costs,” said Benjamin Cabanes, real estate director, Korian.

But there are a lot of different opportunities to invest in a wide variety of assets and plenty of capital to be invested, he said, so the outlook for the sector is very promising.

 

The article was originally published on Real Asset Insight (November 2020). You can read it online at the following link.
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