Global life expectancy has increased radically over the last number of years, with the World Health Organization (WHO) reporting that it increased by 5.5 years between 2000 and 2016. The European Commission also projects that by 2070, the old-age dependency ratio will increase to 51.2 percent, implying a move from the present 3.3 working-age people for every over-65 citizen, to just two.
According to the CSO, the Irish population aged 65 years and above increased by 19.1 percent between the 2011 and 2016 censuses to reach 637,567, and Future Analytics projects that this will increase very significantly from its 2016 level to nearly 860,600 by 2026. As a result, there is and will continue to be considerable demand for senior living alternatives in Ireland, with the current market offering not providing the appropriate or necessary range of options to account for the varying requirements of our aging population.
This has led to growth in senior living accommodation market in recent years, but the market is immature and remains undersupplied, which has been exacerbated by the pandemic. However, it constitutes an attractive asset class for a number of reasons:
- Long-term revenue opportunity, backed by the demographic shifts highlighted above
- Given its alignment with BTR and PBSA, with the added healthcare aspect, it presents an opportunity for developers in the residential space. Not only in terms of portfolio diversification, but it is less competitive than these more established asset classes
- Conducive to modular methodologies, given the degree of repeatability, so the benefits associated with off-site (e.g. shorter programme can lead to earlier delivery and achieving return on investment sooner than with traditional methodologies)
- It benefits from a less cyclical nature
- Downside protection offered by conversion potential into more generic residential
- Longer occupancy periods than assisted living or nursing care homes, whereby individuals are entering through necessity and typically at a stage of higher dependency, further along the aging trajectory
Schemes now being developed for older people vary across the three main residency types: independent living (IL), assisted living (AL) and nursing home (NH). When commissioning and designing a senior living development, as the level of care increases for a resident, so too do operational costs. With COVID highlighting the need for greater care and vigilance against infectious diseases, tight planning and cost control considerations will be necessary.
The five main cost drivers that need to be managed across senior living developments are:
- Floor area
- Rehabilitation facilities
- Occupational therapy requirements
- Communal and recreational spaces
As the level of care grows, so does the amount of additional space required, while extra accessibility features also need to be considered. This inevitably leads to an increase in the overall cost of development. Some schemes in the US and Europe combine the three residency types mentioned above into a single development, reducing the cost of developing a full nursing care home facility by splitting the proportion of residency types. This also serves to futureproof residences, as individuals can move between units as their level of care requirements increase.
As with all development schemes, floor area is the main cost driver in senior residential projects. Up to 50 percent of space in nursing home developments is apportioned to ‘bed’ space. The ratio of bed-to-ancillary/support spaces (such as rehabilitation suites, etc) can significantly impact the cost of development for senior accommodation providers. In cost terms, independent living units which have minimal additional support features would be closer aligned to a standard residential unit development or purpose-build to-rent accommodation model. This would cost 10 percent to 20 percent less than standard nursing home development construction.
The construction of rehabilitation space for residents is an important consideration when drawing up plans for a later living scheme. The additional cost associated with these areas can vary, depending on the level of medical treatment being offered. IL or AL facilities will require less rehabilitation space, since residents will be active and will not require on-site physiotherapy or other such treatment.
Occupational therapy requirements
Another driver of floor area is the space required to facilitate movement and support. Typically, nursing homes will be designed to facilitate one and two care providers in assisting residents with their movements in and out of bed, or around a room. In IL/AL settings, individual room floor areas may be smaller, given residents are able to move unaided within their unit (15 percent reduction on rooms). Similarly, IL and the majority of AL units do not require the installation of individual hoists, which can often cost between €3,500 and €7,500. Another consideration is the provision of wet rooms, often a standard feature of AL and nursing home facilities. Accessible bathrooms with additional Building Regulation Part M features would need to be larger and therefore increase the required floor area per bed.
Communal and recreational spaces
Central catering facilities/dining and communal spaces add considerable additional floor area, depending on resident numbers and activity offerings provided. As IL residents often cook independently this reduces the need for larger kitchen and dining facilities. Internal and external recreational spaces are particularly important social aspects of senior living, and facilitate the sort of interaction residents seek when moving into senior living developments.
External landscaped areas (with seating), sensory areas, TV lounges, multi-purpose rooms and halls for entertainment and other activities can be constructed on-site and shared across a campus by all residents.
Safe and sound
Security – and the peace of mind that goes with it – is often a major factor in a person choosing one senior accommodation facility over another. Perimeter security, external lighting, CCTV, security alarms, security/medical response buttons and nurse call systems should be considered as part of a development budget.
Other security measures include protecting vulnerable patients or residents from wandering off the premises. Systems such as swipe access (internal and external), automatic doors and centrally controlled security systems may be required, while visitor control will be an important consideration going forward in light of the impact of COVID-19 on older people in senior living accommodation.
With improvements in healthcare and people leading longer and healthier lives, senior living options are growing. The best senior living schemes are responsive to the needs of a new generation of resident, whose needs will adopt and change over time. This increasingly complex and sophisticated market requires enhanced cost and project management controls to ensure proper delivery of the development.