The number of residents aged 60 and over has increased by 47% over the past decade in China, making luxury retirement homes an attractive investment destination.
William Tang – retired – decided to change his life. From the bustling center of Shanghai, he spent $220,000 to rent a two-bedroom apartment for 15 years at Ardor Gardens, a luxury aged care facility in the western part of the city.
“It’s like a resort,” said Tang, after perusing amenities such as an indoor pool, yoga studio, wine tasting and 24/7 aged care service.
High-class retirement home project. Source: Lendlease Corp Ltd.
For many Chinese and international investors, the development of aged care facilities such as Ardor Gardens is attracting more than ever. Money is pouring into the sector as the world becomes aware of how fast China is aging. For example, Sydney-based real estate and infrastructure company, Lendlease Corp Ltd., invested $280 million in Ardor Gardens.
According to China’s latest population data, the number of residents aged 60 and over has increased by 47% over the past decade to 260 million, more than 18% of the country’s total population. By 2050, it is forecast to nearly double to nearly 500 million.
“The market may be completely different 10 years from now,” said Lendlease China President Ding Hui. “If you wait 10 years before you start thinking about buying land, learning, training your team, and developing a business model, chances are you missed out on a lot of exciting opportunities.”
Besides domestic investors, dozens of foreign investors have also flocked to Ardor Gardens in recent years. Notable names include Singapore’s state-owned Temasek Holdings Pte, healthcare investment firm Columbia Pacific Management and US-based Fortress Investment Group.
The company’s head of real estate Stanley Ching said that “investment giant” Citic Capital is aiming to build a number of elderly care projects with some major partners in the next few years. . Meanwhile, China Life Insurance Company has just started selling a 280,000 square meter (3 million square foot) elderly care complex on the outskirts of Beijing – the equivalent of 40 standard football fields.
While many of these companies have yet to cash in on this retirement home or aged care service, they are betting on the long-term profits it could bring, citing that demand There will be increasing interest in such establishments, as will the change in social norms in China.
The supply of elderly care beds in China has fallen short of demand. Photo: Ministry of Internal Affairs, Qianzhan Industrial Research Institute.
On the policy front, the government is drafting detailed plans to strengthen the aged care sector, focusing on expanding basic services and building affordable rates such as increasing the number of beds in hospitals. nursing homes, and dedicate resources to training professionals…
“China’s high-end senior care market hasn’t entered a period of high-speed growth yet, but it has certainly entered,” said Ye Liming, director at Shanghai Senior Service Industry Association. said.
Demographically, long-standing traditions have hindered the popularity of retirement homes and aged care homes. Although the progeny in China have long been bound by the obligation to care for aging parents, many families are the exception because they live apart after years of labor migration and urbanization. Worse, many retirees have only one child to rely on due to China’s one-child policy.
Despite these demographic changes, industry experts predict that only about 3% of elderly Chinese are willing or able to afford the types of services Lendlease is providing. The majority are expected to choose to stay at home or in government-subsidized nursing homes. While 3% is big enough given China’s large aging population, the figure presents a tough one for investors.
Canteen at Ardor Gardens. Source: Lendlease Corp Ltd.
As of June, Lendlease had only filled about a quarter of the first 100 apartments in Ardor Gardens that the company put on the market about 10 months earlier.
In a recent report, consulting firm Qianzhan Industry Research Institute noted that occupancy rates of retirement homes for the elderly (mostly located in affluent areas such as the Yangtze River Delta) fluctuated at 37%-48%, much lower than the 85% they needed to break even. Customers are constrained by costs, high land prices and the absence of a real estate investment trust market – an important long-term funding channel for elderly care property investors in urban areas. developed markets such as North America, Europe and Japan.
Lendlease’s Ding believes that it is important for dozens of seniors to spend their money to buy a rental property in Ardor Gardens, especially during the pandemic. He said that the traditional mentality of the elderly is also gradually changing: They will reduce the tendency to save money to own a property that can be passed on to the next generation.
Mr. Tang, who is expected to move to Ardor Gardens in September, is the kind of retiree investors are looking for: Rich, open-minded and always looking for fun in the late years. “We don’t just spend money on a property,” says Tang. For us, it’s for a more exciting second life.”
Summary: “China’s Luxury Retirement Homes Draw Millions From Investors” (Charlie Zhu & Emma Dong – Bloomberg)
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