The last few years have brought a period of unprecedented change which has reshaped the real estate investment landscape. As a result, alternative sectors have emerged that tie into global megatrends and can provide long-term opportunities.
Digitalisation and demographic change in advanced economies are two trends that are driving large shifts in real estate. As a result of the increasingly ubiquitous use of artificial intelligence, data centers are experiencing unprecedented demand. However, they are just one part of the alternative real estate story and emerging alternatives such as senior living and medical-associated real estate are lesser-known opportunities.
Gaining investor interest: Senior living and the medical outpatient sector
To future-proof real estate portfolios, it is essential to understand how an aging population will impact demand for buildings and services.
Globally, life expectancy is increasing and creating a growing population of those aged 65 and over. Meanwhile, working age populations are stalling in some countries, and even decreasing due to falling fertility rates.
The burgeoning global senior population is creating a significant opportunity for real estate investors focused on alternatives, such as care facilities. As demand for these facilities outstrips supply, the sector presents a compelling investment opportunity.
In the U.K., for example, Savills estimates an annual need for 14,400 new care home beds over the next decade. However, the industry has struggled to keep pace, with only 5,900 beds under construction in late 2023. Similar demand patterns can be seen across other advanced economies. By 2065, seniors in Japan are expected to comprise 25% of the population, necessitating a significant increase in care home capacity. An undersupply of specialized care equipment, such as beds, is an early indicator of the growing demand for care facilities in the years ahead. To keep up with growing global demand, significant private sector investment will be needed.
Past performance is no guarantee of future results. Investing involves risk; principal loss is possible.
For professional investor use only.
