The sector is forecast to grow by £2.65bn as customers look for greater flexibility and investors become more attracted to the sector.
According to research by JLL, 2022 could see the largest ever year-on-year increase for rental units. Between 2021 and 2022 there was 12% growth in number of integrated retirement community (IRC) rental schemes (153 to 171) and an 18% rise in rental units (6,942 to 8,175).
This builds on the 200% increase in the number of IRC schemes offering market rent as a tenure over the past ten years and nearly a 400% rise in the number of units available.
Within the IRC rental market – where there are 8,175 homes (2012: 1,654) across 171 schemes (2012: 57) – 5,632 homes are forecast to be added over the next half-decade. JLL estimates the value of the rental market could reach £3.84bn based on current available units.
More than a quarter (28%) of IRC schemes built in the last five years include a market rental option. Retirement housing – self-contained homes for sale, shared-ownership or rent – has seen a 91% jump in the number of rental units over the past half-decade and a 45% rise of schemes with the option.
Institutional investors are increasing their exposure to the shifting retirement rental market. Nearly half of schemes that offer market rental also offer the ability to either purchase, rent or enter into a shared ownership agreement. However, there is a growing rental-only offering with three IRC operators having no for-sale option on their homes.
Recent rental deals include M&G Real Estate purchasing two rental assets from Birchgrove for £69m, with the latter operating under a management agreement, and John Laing and Macquarie’s purchase of McCarthy Stone retirement rental units. Macquarie have now exited their 50% stake to John Laing, who hold the entire portfolio.
Daniel Thorpe, senior research analyst at JLL, added: ‘Investors experienced in build-to-rent strategies are broadening into retirement rental homes. This focus is part of a broader trend towards greater institutional interest into the retirement living sector, following the trajectory of advanced markets like the US. For investors, the retirement rental model provides a unique opportunity to diversify their portfolios in a sector with positive ESG credentials backed by strong demographic forecasts.’