A new report on Baby Boomers' view on retirement has focused on the need to “unlock housing stock” but it is the conclusion that all retirement living, and land lease community operators, should pay attention to.
Yes, we all know there are single people living in large houses, with two and three bedrooms unused, but that is their right.
The report’s author, REA Group senior economist Angus Moore, stated the goal for the report: “Encouraging older and smaller households to downsize will be critical for ensuring we meet the needs of our aging population and use the housing we currently have more efficiently."
However, it is only on Page 15, the final page, where the truth is revealed and what operators need to listen to.
“For downsizers, the home itself must feel like an upgrade, not a compromise,?” states the Downsizing Australia report by ASX-listed land lease community operator GemLife and the leading property website realestate.com.au.
Kevin McCoy, CEO of retirement village operator Levande, made such a realisation as the floors went up on its latest project The Cambridge, a 28-storey vertical retirement village in Epping, in Sydney’s northwest.
“Once we started getting reservations in, data on sales and what the market was doing, we realised the market had shifted. People were looking for more three-bedroom apartments than two bedrooms,” he said.
Construction had already reached level 17. Levande has been able to reconfigure floors 20 to 26 to put in more three-bedroom apartments, cutting the total number of units from 172 to 158. He is now getting as much as $2.6 million for a generiously sized apartment.
Established Villages – An Upgrade, or a Compromise?
We know the average age of villages around the country is 30-years. It is difficult to change the mix of units in a broad acre development without the operators incurring significant redevelopment cost. What is being delivered is unit refurbishment to meet the market. Customers not wanting to compromise tells us reinstatement (a fresh coat of paint and new carpet) just doesn’t cut it any more. Aveo invested $100 million upgrading its villages before Brookfield Asset Management sold it for $3.85 billion.
The sector has also seen a ramp up in CAPEX spend on Community Centres. As newer villages provide a variety of high end amenities, reinvesting in the spaces already available has proven a winner. Under Brookfield’s ownership, Aveo invested $200 million in village upgrades before selling it for $3.85 billion. Other operators are using the same strategy.
With too few retirement village units being delivered each year to maintain a penetration rate of 12% of over 75s, upgrading existing assets is a no brainer. And with a 2-bedroom retirement village unit on average being 59% of the median house price, there is likely more elasticity in the market than operators realise.
The build they will come mantra is dead
Build what the customers want is now on trend.
If operators want people to pay top dollar and move from their homes, they have to provide what the clients sees as a step up, not down. Generously sized apartments, near to shops, transport, amenities which will keep them occupied and care. Opal HealthCare occupies floors one to four at The Cambridge.
Three in five survey respondents said they would consider moving into an over-50s lifestyle or retirement community. Ask yourself is your village going to be a step up or a step down.
