New research points to Industry future growth

With around 42,000 retirees now living in over 400 retirement villages in the big six portfolio in New Zealand, this sector of life has quickly become an industry that has attracted massive current  and future investment opportunities.

The big six operators of Ryman, Metlifecare, Bupa, Summerset, Arvida and Oceania along with a multitude of smaller entrepreneurs all contributing an exceptional care level with around 33,000 units between them, are attracting increasing numbers of retirees.

In fact, the latest research from JLL into the multi-billion-dollar sector shows a record number of villages and residents in the past year or so, although this is currently slowing a little.

JLL’s senior research analyst and study author Lisa Chen said “The continued ageing of the population was creating a clear demand stream for retirement village life and this would persist into the future.” She said participation levels of those aged 75 plus is continuing to increase each year bringing a proliferation of new developers and owners who appeared to be concentrating on smaller and niche properties in a much wider range of locations.

Chen’s market analysis reported that the aged care market continued to battle with more labour and cost intensive management requirements while also providing a key part of retirement living accommodation for those aged over 75 years old.

“An estimated 20,100 aged care beds are located within aged care facilities positioned in retirement villages which is about 51 percent of the total aged care industry’s bed count,” said Chen.
JLL’s database also recorded the removal of 12 aged care facilities from the marketplace and the addition of eight new units which resulted in a net decline of properties from 676 to 672 although total bed numbers had increased as new developments were considerably larger than those removed.

“Particularly hospital beds increased by 300 consistent with increasing demand for hospital care as the population aged,” said Chen.

Discussing the ageing population, Chen said that at a national level, the population aged between 65 and 74 years increased by just over 16,000 between June of 2017 and a year later with 26 percent occurring in the Auckland region. The increased numbers in the 75 to 84 age group was much lower at just over 6000 of which 33 percent were in the Auckland region.

The 85 and over group was smaller again increasing by only 1500 nationally and again a third of these were in the Auckland area. The growth forecast in this elderly sector is increasing over the next 25 years, there would be a 149 percent growth in over 75 year olds. As expected, the Auckland region will capture around 156,000 of these ageing residents.

All the regions are expected to see significant growth in the senior population with the distribution, according to Chen, expected to remain relatively stable at around 74 percent in the North Island and 26 percent in the South Island over the next 25 years. At present, the vast majority of seniors (around 87 percent) don’t live in retirement villages but this statistic is certainly going to change with time.

“The highest 75-plus regional population participation rate was in the Bay of Plenty with 18.5 percent followed by the Gisborne area with 17.5 percent and then 16.5 in Auckland,” said Chen. "In our view, the market is proliferating over time, but the new developers and owners are concentrating on smaller niche villages.”

Chen said that as an observation of the big six operators, the lure of the Golden Triangle incorporating Auckland, Hamilton and Tauranga is obvious with over 64 retirement villages within that region. It is also the area of the country representing the highest concentration for new developments by the big six.

At the time of this research earlier in the year, there was considerable activity in the new villages development pipeline which saw units under the “early planning stage” at 46 percent, a further 31 percent in the “in planning” stage and 22 percent listed as commenced.

A further 96 retirement villages had already announced planned extensions. In fact, the big six village operators had an estimated development programme of nearly 8000 units of which 40 percent were in conjunction with currently operating villages.

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