ANALYSIS: What (and who) is shaping the future of aged care infrastructure?

By Russell Allison, Senior Director, Head of Health, Aged Care & Retirement Capital Markets, Knight Frank

The aged care and retirement living sectors are experiencing significant change, particularly in terms of resident expectations and design configuration.

Historically, residential aged care has been viewed as hostels (low care) and nursing homes (high care), however this view has undergone a serious transformation as facilities are becoming more flexible and innovative to meet care needs. These changes have allowed operators to develop their product offering with an expanded range of accommodation, driven by an ageing population that is demanding more from providers.

Getting older, and there’s more of us

Globally we are moving towards an aged demographic, which will be more pronounced in many of the developed countries such as Australia, Japan and the US.

Following a significant pick-up in the birth rate between 1946 and 1964 as postwar government policies promoted population growth, a significant structural shift in Australia’s demographic make-up followed. Labelled baby boomers, this generation is today shaping the way accommodation is provided to older Australians. With baby boomers currently aged between 53 and 71 years of age, the demand for seniors accommodation is on the rise, further accentuated by medical advancements that have increased their average life expectancy.

As per the 2016 Census, there were almost 3.7 million Australians aged 65 and over, representing 15.7% of the Australian population, up from 13% a decade ago. The increased proportion of persons aged 65+ is the result of the baby boomer generation flowing through to this age cohort.

Looking ahead, population growth among the 65+ age cohort is projected to be significant. By 2036, it is expected that there will be almost 6.6 million people aged 65+, at which point they will represent almost 21% of the Australian population.

Share of 65+ Population

Ageing population graph

Source: ABS. Knight Frank Research

Notably, this growth will underpin a large pick-up in retirement and aged care demand and highlights the opportunity to both existing operators and new market entrants.

For a look at Knight Frank’s latest snapshot into seniors living accommodation in Australia, Seniors Living Insight, please click here.

Ageing in place and co-location

The new consumers in aged care are mostly unlike any previous generations. Today’s consumers are highly educated, wealthier, tech savvy and accustomed to a higher standard of living compared with generations past.

Subsequently, care providers have had to adapt and deliver in line with changing expectations and preferences of this new wave of older Australians.

The older generation today is less inclined to leave the family home and established social, community and family networks. This has been one of the driving forces behind home care (known as Consumer Directed Care), allowing older Australians to age in their own home, which is the most common preference.

However, this has also transferred into the residential seniors living sector (retirement and care), with consumers wanting to remain within proximity to their established family and social networks.

With this in mind, operators have been pushing for quality suburban locations and are increasingly beginning to co-locate, integrating retirement and aged care on one site, providing a continuum of care. This allows residents to age in place, with security in the knowledge that they don’t have to move as their living and care requirements change as they age.

Co-located facilities are generally campus-style in city fringe and suburban locations close to retail, transport and leisure services, multi-building and multi-level, allowing residents to retain the lifestyle they enjoyed in their own home.

Brisbane in many respects is leading the pack with a number of high-quality, co-located facilities already operational, under construction or in the pipeline.

This local push has been helped along by Brisbane City Council’s Retirement Living and Aged Care Accommodation Incentives for developments in medium and high-density zones. In essence, this is now offering infrastructure charges reduction, increase in allowable building height and promotes co-location of retirement and residential aged care facilitates.

Read more on council’s Retirement Living and Aged Care Accommodation Incentives here.

Things are looking up - literally

With quality, large suburban sites becoming progressively more unaffordable and harder to find, operators are increasingly looking for new models.

Smaller sites, increased desires to remain close to family, social networks and existing amenities, and the increased acceptance of high-rise living has encouraged more aged care facilities to consider vertical configuration, including integration and co-location.

Going vertical was always the logical progression from single-level facilities to multi-level and now to high-density vertical, however this latest move is a revisit of previous attempts at higher density retirement and aged care accommodation, which arguably were then ahead of their time.

As with campus-style facilities, Brisbane is now experiencing an increased number of high-density vertical facilities planned or under construction, including the Aveo Gasworks at Newstead, Portofino at Hamilton and the Regis facility at Lutwyche.

While going vertical isn’t without its inherent risks, necessity breeds innovation and more and more we are seeing new ways of delivering vertical care with co-location. It is conceivable that we will see more vertical integration of retirement living with home care, residential aged care, medical services, hospitals and other traditional community uses.

Although there are many challenges surrounding the ageing population, scarcity of suitable sites, increasing land values and the risks associated with funding construction of a large vertical development, we definitely see this as a ripening opportunity.

The opportunity will deliver new, innovative and financially sound solutions leveraging off an expanding consumer base and satisfying the changing preferences of more discerning older Australians.

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