Living sectors

The UK’s later and alternative living sectors - encompassing Build-to-Rent (BTR), retirement living, care homes, student accommodation, and co-living - are poised for a dynamic 2025.

With demographic shifts, changing housing preferences, and strong investor demand at their core, these sectors are set to deliver resilience and opportunities despite broader market challenges.

Key drivers

Demographics remain a foundational driver across all types of living sector. The UK’s over-65s make up around 20% of the population, and this proportion is expected to grow year on year, with an additional 1.5 million over 65s in just the next five years, fuelling demand for retirement housing and care facilities.

Meanwhile, student numbers remain robust, with full-time enrolments exceeding 2.3 million in 2023/24, a figure expected to reach a record of 3 million full-time students by 2030. International students have accounted for much of this growth. Their numbers are expected to slow slightly with the introduction of ‘tougher’ migration legislation in 2024, and we have certainly seen a fall-off in international students in central London over the past two years. However, they will still account for a significant proportion of the student population as universities are able to charge higher fees to international students than domestic.

For younger professionals and families, affordability pressures have been keeping rental demand high. While affordability is set to ease slightly over the next 12-18 months as wages rise in real terms, mortgage rates will remain higher than over the last decade. We expect further house price growth in 2025, so demand in the rental sector will remain elevated. Indeed, our latest tenant survey found that a wide variety of household types would like to live in BTR developments, both multi-family and single-family styles.

Across all sectors, undersupply remains a key issue. The majority of students continue to live in the private rented sector with PBSA beds only able to cater for a minority of the student population. Similarly, in a recent study commissioned by the UK government, it was found that retirement housing units or ‘supported housing’ will need to grow by nearly 1.3 million over the next 15 years, to meet the levels of expected demand. This imbalance presents significant opportunities for developers and investors.

Opportunities

Build-to-Rent (BTR): With around 100,000 completed units and a pipeline of over 140,000 under construction or planned, the supply of BTR units continues to outperform those in the wider private rental sector. Annual rental growth remains high at 8.7% (October 2024), and while urban locations like London and Manchester lead growth rates, they remain elevated across almost all parts of the UK.

Whilst Multi-Family Housing is still showing investment potential, the main focus for future investors looks to be within the Single Family Housing segment of the market, with a growing list of locations (both primary and secondary) coming within scope.

Student Housing: PBSA occupancy rates exceed 97% (Unite Students), and a lack of supply combined with robust demand will ensure consistent investment returns going forward (although market dynamics are highly location-specific).

Retirement Living: This sector will remain popular with investors and funds, particularly as it can deliver double-digit rates of return. Innovations in integrated care and lifestyle-focused developments, such as retirement villages with wellness centres and social hubs make this an attractive investment avenue.

Co-Living: Demand for co-living is forecast to grow as young professionals and single-person households rise. The type of unit delivered by a co-living development provides an excellent solution for households looking for affordable units with low barriers to entry and exit, while also providing social opportunities for those who live alone. It is also attractive to investors and developers as it offers a quick, scalable solution to the UK’s housing challenges.

Positive outlook for 2025

The later and alternative living sectors are positioned for substantial growth in 2025 and beyond. With rising demand, continued structural undersupply, and strong investment fundamentals, they provide opportunities to generate meaningful solutions to the chronic undersupply of all types and tenures of housing across the UK.