Germany’s Senior Housing gap opens a new front for investors

Germany is missing roughly 400,000 senior living units. The surprise is where the missing stock actually sits. Classic care homes more or less cover demand. The real deficit is in service and community-oriented senior housing — the part of the market that investors once treated as a footnote. A recent RUECKERCONSULT briefing with IMMOTISS, Humanika Group, Real Blue and Drees & Sommer made that point with some force.

IMMOTISS’s Jochen Zeeh likened the sector to a “care tanker”, slow to manoeuvre but now grinding into a structural bottleneck. Germany has around 1.6 million senior units, which covers about 8% of over-65s. A nationwide survey puts “reasonable sufficiency” at 10%. The maths is simple: roughly 400,000 units are missing. The shortfall is not in inpatient care, which already provides about 900,000 beds. It is in service and assisted formats, stuck just above 3% coverage and often oversubscribed before the doors open.

The operator landscape is equally lopsided. The top 100 operators account for 38% of facilities. Another 31% run only one or two homes, usually with limited capital for upgrades and a technology profile borrowed from 1998. “A high degree of fragmentation, but consolidation brings a professionalisation effect,” Zeeh said — probably the polite version of the story.

A changing target group, and a very different product

Demand is changing faster than the supply. Humanika’s Svetoslav Markov described a generational changing of the guard: “The post-war generation is slowly disappearing; the Boomer generation is entering, and their needs are completely different.” The classic care-triggered move is giving way to something more modern. “Anti-solitude, community, comfort and service,” Zeeh noted, now drive the decision to relocate, especially in cities like Berlin and Hamburg.

Markov argued that senior living has to be built as a product, not a floorplan. Too many schemes begin as “finished drawings based on demographic tables rather than target-group research”. Humanika instead positions itself as a platform, using data to tailor services to residents’ actual behaviour. Modern sensor systems learn patterns quickly, detect deviations and help contain energy costs — a safety net that does not require 24-hour staff pacing the corridors.

Drees & Sommer's Michael Eisenmann added that the sector itself is being reframed. “We had to stop looking at this through the classic care lens,” he said. “The relevant trends are demography and the changed preferences of older generations.” This shift towards ambulant and service-led formats is already influencing how investors classify the segment and evaluate operator risk.

Real Blue’s Prof. Dr. Henric Hahr sees the same shift but at a wider angle. Senior housing is becoming an integrated “service and technology platform” where real estate, health, social participation and digital connectivity hang together. That means heavier upfront investment in digital infrastructure and communal areas, but lower operating costs later. Eisenmann boiled the practical priorities down to three: service, community and digital readiness.

Affordability, however, remains the thread that can snap the whole concept. Investors still talk about 5% yields. “In principle, yes, but only with a caveat,” Hahr said. Construction costs have not eased, and rents in this segment already sit above local averages. Without KfW or similar support, many schemes struggle to make financial sense. One participant asked the obvious: how do Sozialhilfe recipients access these offers?

Two solutions surfaced. First, publicly funded units pegged to local reference rents. Second, smart space planning: smaller private units, often 35 to 40 square metres, paired with generous communal areas. Seniors coming from larger flats can end up with a similar monthly outlay but gain community and service access. As Zeeh put it, the real argument is about “the single square metre price”, not just the headline rent.

Uncertainty about how schemes are defined

Regulation adds another layer of drag. Markov criticised the “unclear legal categorisation” of alternative senior formats, which leaves approval authorities guessing whether a scheme is ambulant, stationary, or somewhere in bureaucratic limbo. The result is slow permitting and rising development costs. He argued that municipalities could unlock supply far faster by releasing land specifically for modular and preventive senior concepts.

For investors, underwriting this segment means aligning product design, operator quality, affordability and funding. It also requires accepting that this is residential with services, not healthcare with beds. The strategic tilt is nonetheless obvious. Eisenmann sees reallocation already under way as institutions lighten office-heavy portfolios. Surveys increasingly show senior living rising up investor priorities, particularly formats where residents keep control of their day-to-day lives.

Interest is also coming from abroad. Zeeh sees international capital and German groups with too much office exposure scrutinising the segment more closely. Demographics do not negotiate, and the supply deficit is measurable. Senior living in Germany will not stay a niche. The investable opportunity lies in the service-oriented, community-focused and digitally enabled formats emerging now, not in the Pflegeheim models of the past. Investors who engage early will be closer to where Germany’s ageing society is actually moving, rather than where it has already been.