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Development Through Immediate Headwinds Vital To Address Ageing Population’s Growing Demand For Retirement Living

JLL’s retirement village and aged care report says ‘big six’ central to ensuring sufficient supply

JLL’s 11th annual report on the New Zealand retirement village and aged care sector, out today, reveals that although the industry has the development pipeline to meet the ever-growing need of our ageing population, a significant increase in pace of delivery is required to avoid demand outstripping supply within the next decade.

JLL reports that as of the end of last year, New Zealand had 452 retirement villages, comprising 39,070 units providing homes for 50,791 residents[1]. This followed the delivery of an additional 1581 units across 27 new and existing villages through 2022.

By applying the current 14% penetration rate for retirement village living to population forecasts for the next decade, the whitepaper outlines that by 2033 there will be demand for an additional 22,051 retirement units by 2033. However, while the current development pipeline indicates capacity to add 24,770 units across 95 villages over this time, JLL NZ’s Head of Research, Gavin Read, says there is no precedent for delivery at this pace and scale.

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“In the 11 years that we’ve been reporting on the sector, we’ve seen the number of retirement units increase by close to 80 per cent, from a starting point of just below 22,000. Over the last five years, these units have been built at an average rate of 1,854 per year, so to deliver this pipeline we’re looking at needing to build 33 per cent more units each year for the next decade.”

“This would seem ambitious, even with generous economic tailwinds, but when we consider the current economic climate of high interest rates, high construction costs and low confidence, alongside softening residential valuations, there’s significant pressure being placed on delivering units that are already under construction, let alone those planned for further down the line.”

“Village operators will therefore need to look beyond the current economic conditions to keep pace with demand.”

Around two-thirds of the current stock is owned and operated by the ‘big six’ of Ryman, Summerset, Metlifecare, Bupa, Oceania and Arvida, who between them accommodate more than 45,000 residents and employ close to 20,000 staff. Read says it will remain incumbent on these major players to continue to do the heavy lifting through delivery at scale in areas of greatest demand, particularly Auckland, Canterbury and the Waikato.

“Most new villages opened by the ‘big six’ are larger, with around 200 units, as operators focus on economies of scale in terms of construction and operating costs. With the average village size for smaller operators remaining at 52 units, it’s clear that these bigger operators hold the key to maintaining supply.”

This year’s whitepaper for the first time also looked further into the future to analyse demand and supply up to 2048, by which time New Zealand’s 75+ population is expected to have almost doubled to close to 760,000. Even factoring in a decreasing penetration rate, the whitepaper outlines the prospect of the shortfall in supply reaching close to 21,000 units within the next 25 years.

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $20.9 billion, operations in over 80 countries and a global workforce of more than 103,000 as of December 31, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.

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