L&G prepares for retirement

Legal & General Real Assets is preparing for a push into the retirement homes sector using its modular housing business. The institutional investor has yet to decide how much it will invest, but it has started drawing up plans and hiring a team for a launch early next year. L&G does not currently own any retirement homes, but it could have an advantage over competitors if it replicates its L&G Homes build-to-rent model, which will use prefabricated buildings developed at its 550,000 sq ft Leeds facility from January. Although it is still deciding how it might develop the homes, labour costs are estimated to be as much as 25% lower using  modular construction. L&G Homes, which is looking to build 7,500 homes a year, plans to use a combination of modular construction and traditional development, depending on the scheme. As with the build-to-rent model, L&G would have a strong influence on the design of retirement homes. It has yet to decide whether to offer homes for sale or rent, and is in the process of deciding a potential ownership structure.  In August, Pegasus Life said it was extending its “John Lewis-style” retirement homes strategy to include rental – the first major operator to do so. Ahead of the announcement of its own build-to-rent platform, L&G launched a £600m build-to-rent fund using cash from its own balance sheet matched by Dutch pension fund PGGM. It is likely that it will also partner with an investor on the retirement homes plan, but arrangements have yet to be finalised. L&G retirement homes will be built in urban areas across the UK. The development will not provide healthcare, but will provide a community for retired residents who no longer want the hassle of managing a large household or who want to release equity. The platform would also be an extension of L&G’s commitment to urban regeneration. The firm has invested billions in regeneration and infrastructure on behalf of insurance clients and in joint ventures with institutional investors. Demand for retirement housing in the UK is outstripping supply by five times, according to Tom Scaife, partner, Knight Frank Institutional Consultancy. He said: “There is significant appetite in the market to develop and invest in the sector and provide specialist and aspirational housing that the older generation now demands. “However, it remains to be seen whether the scale of investment will begin to rebalance the mismatch between supply and demand in this market.” • To send feedback, email amber.rolt@estatesgazette.com or tweet @amberrolt or @estatesgazette