Land Lease Communities unlikely to overtake retirement villages in market size

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We are regularly asked if retirement villages have had their day, and will land lease communities take over as the dominant retirement living accommodation?

Our answer is ‘no’.

There is no doubt that LLCs are attracting eager capital to invest in the fast development and payback LLC sector, and that at the moment land is available and cheap, compared to retirement villages who have moved to metro and regional CBDs.

But the fundamentals still support retirement villages having a stronger future. The RV sector has 800+ operators, with 20 big operators. The land lease community currently has eight biggish operators and forecast consolidation we believe will result in four to six bigger operators.

There is only so much that one operator can do in one year. From the chart above, you can see that say five large LLC operators are going to deliver four big new projects a year by 2026, averaging say 250 homes, they will each require $500 million in annual capital investment, and the executive team to deliver 1,000 new homes each (which is 19 each week).

This is a stretch.

However, the village sector has 20 big operators with balance sheets and executive ranks that are capable of delivering two to four medium rise developments a year. Their capital requirement will be $120 million to $240 million each.

Both sectors will also have to sell this new home volume, and fast. Again, we believe that retirement villages by 2026 will be in the box seat in sales.

We will go into more detail on both propositions – capacity to develop and why sales will favour villages – in this week’s SATURDAY. Check it out at 6am in your inbox.