Integrated Retirement Communities: the case for more operators?

The Integrated Retirement Community (IRC) model of senior living is continuing to grow in the UK (in 2023 58% of new seniors housing homes built were part of an IRC which is particularly impressive given that the IRC market currently accounts for approximately 1/12th of the total seniors housing market). It is, therefore, an exciting time for those investing, developing, operating – and living in – IRCs in this country. However, the relative infancy in the sector also presents challenges and, one of those challenges is, arguably, the volume of specialist operators. 

The operators that are currently active in the UK are growing which is great but even with their anticipated growth it may be difficult for this relatively small group of operators to expand their operations sufficiently to keep up with predicated demand for this specialist housing as the population ages (it is projected that there will be 1.7 million more over 65s in the UK by 2029).

Even if that group of operators were able to expand to meet the growing demand we think there is a good case for more operators coming into the sector:

1. Competition, and the kind of joint learning and co-operation/co-ordination promoted by the Association of Retirement Communities Organisation (ARCO), is vital to nurturing innovation, creativity and new ideas – this added competition can also encourage greater quality and diversity of product (in terms of ownership, services, locations and price, etc) so that ultimately the customers have more choice.
2. Funders and investors may be hesitant about deploying capital for the growth of the IRC sector where there is a lack of diversification in the operator market – with substantial capital at risk for major developments funders and investors want re-assurance that if the borrowing developer/operator hits solvency issues there will be a ready supply of IRC developer/operators available to "step-in" and rescue the project.

So where might these additional operators come from and what do these operators need to bring to the table? A good IRC operator needs, among other things, to have experience of management of residential developments, provision of services, hospitality, community building and, ideally but not crucially, have experience of the provision of care. Changes we are seeing in the IRC space could serve to provide impetus for new operators to come in, including:

• Increasing alternatives to the traditional "developer-operator" model (whereby the developer procures the construction of the IRC and then operates it) to more of a "management" based structure (whereby a developer procures the construction then engages a third-party operator to operate it).
• A move away from the sale model (whereby residents purchase their home from the developer and pay for upkeep/services via a service charge and/or event fees) to a rental model (whereby residents rent their home from the operators).

The more we see the models highlighted above the more the market will open up, in our opinion, to existing players in the build-to-rent and student living sectors (with their experience in management of rental units) and the care home sector (with their senior living experience) to play the role of "manager/operator".

There are synergies between those sectors and the attributes required to be a good IRC operator, and this pool of potential operators could make a substantial impact to the diversification and scale of the sector in the coming years. The focus on management, hospitality, community building and provision of services is something these operators/managers can bring to the table, while the care experience of care home operators would be invaluable in the context of IRCs where 88% of residents say the availability of on-site care was a positive factor in their decision to make the move. There is also a precedent for these shifts, as we have seen similar trends in other countries with more mature IRC sectors such as the US market.

So let's see what 2025 has in store for IRCs but we are confident that the sector will continue to grow and that specialist housing for the senior living sector will have its part to play in the UK Government's target for delivering 1.5 million homes over the next 5 years. Increasing numbers of good, quality operators, and more diversification of operators will, we think, play a crucial role in contributing to that growth trajectory.