Retirement sector adds to landbanks to meet rising baby boomer demand

The exponential growth of the retirement village and aged care sector across New Zealand is one of the major trends dictating the buyup of large development sites across the country according to leading property agency, Bayleys.

There have been some significant land acquisitions by major players in the retirement sector in recent years, with sites that may ordinarily have catered for organic residential growth being snapped up for baby boomer-oriented developments. 

There appears to be a five-plus year landbank of development sites held by the big companies involved in the sector. 

Ryman, New Zealand’s biggest retirement owner/operator, recently nabbed the 1.6 hectare former Kingsgate Hotel site opposite Cornwall Park and the 8.92 hectare Tropicana estate in the Lynfield (Mt Roskill) area in Auckland and work is under way for a new retirement village there. Metlifecare is undertaking due diligence on five hectares on Auckland’s Hibiscus Coast – the land is part of the redevelopment of the Peninsula Golf Club – while Summerset has committed to large sites in Wigram and Casebrook in Christchurch.

“With those aged 65 years and over now comprising 14% of our total population, there is no denying the growth factor of the aged care and retirement living sector in this country,” Bayleys national director commercial John Church says. 

“With the sector heavyweights already listed on the stock exchange and others waiting in the wings to join them, the burgeoning retirement/aged care sector shows no signs of taking its foot off the pedal.”

New Zealand’s population aged 65 years and over increased 22% between the 2006 and 2013 censuses. As  New Zealand’s post-World War II baby boomers consider their futures, strategic eyes are peeled for optimal new sites for largescale retirement living. 

Major player Metlifecare has openly targeted the “golden triangle” geographic zone formed by Auckland, Hamilton and Tauranga. 

Metlifecare chief executive officer Alan Edwards says the company has strict evaluation criteria based on demographics, competition and financial feasibility.

“Tauranga/Mount Maunganui is one of the highest per capita age-appropriate communities in the country,” Mr Edwards says.

“The demographics are similar in the Kapiti region. Everyone in the industry has to be aware of the competitive nature of each defined area.” 

Ryman – New Zealand’s largest retirement village operator – bases its buying decisions on the availability of appropriate sites and their proximity to a population that will support a village.

District health board bed numbers, local property prices, demographics, local amenities and other aged-care villages in the area affect Ryman’s land acquisition strategy, according to Ryman Healthcare development manager Andrew Mitchell.

“We set a target to build a landbank of four years’ stock and look for sites to guarantee a pipeline of new villages.”

A newcomer to the NZX-listed aged care sector, Arvida Group, formerly Hercules, raised  $80 million of new capital from its initial public offering float.

Arvida Group chief executive Bill McDonald says it acquired 17 foundation retirement villages throughout New Zealand – concentrating on Christchurch – before the listing in December and is currently undergoing a strategic planning process to determine future land needs.

“As we are a new company, we are focusing on our existing brownfield opportunities that will deliver upward of 250 units/beds over coming years,” Mr McDonald says 

Summerset is in expansion mode and chief executive Julian Cook says up-and-coming areas that are undergoing growth provide opportunity.

“We have stunning waterfront locations in the growing hubs of Hobsonville and Katikati and we’ve recently been granted resource consent to build a $55 million village at Wigram in Christchurch, which positions us as a vital part of the rebuild.”

Summerset has enough land for another seven years of development and it continues to look for sites nationwide.

Oceania Healthcare, the second largest aged-care operator in New Zealand acquired most of its property from not-for-profit groups and private operators. It is currently developing or refurbishing these sites.  

Oceania Healthcare chief executive Earl Gasparich says Oceania also has a substantial brownfields development pipeline of circa 1400 independent living units, care suites and care beds, which will sustain development activity for the next seven years.

Gasparich adds that Oceania’s plans to list on the NZX are “well advanced” and on target for 2015.

 “We are raising capital essentially to fund our development plans. The reported oversupply of retirement living units is a fallacy and demand for new retirement village units is projected to rise from an estimated 1500 units a year in 2016 to approximately 2200 units in 2026.”  

Bayleys’ Total Property magazine – due for release on March 13 – looks into the retirement living/aged care sector in more depth and talks to some of the major operators for their take on fundamentals.

Jody Robb writes for Bayleys Real Estate