By Tony Bridge
First published in The Alliance Journal (Ageing Asia), 2019
This is an exciting and interesting time in history for a number of countries across Asia as they develop a growing understanding of the need to provide appropriate accommodation and support for older people. The exponential growth in the proportion of older people within their total populations, with rapidly changing dependency ratios, has brought to reality the fact that this demographic and socioeconomic trend cannot be overlooked. This pattern is driving new entrants into the market, where we are seeing developers of residential real estate wanting to be more involved.
Others who have demonstrated interest in recent years include businesses involved in community and/or the provision of health services such as private hospitals, medical centres, and similar organisations.
Of course, this has its own challenges in terms of developing knowledge of the requirements of seniors living projects, given that these ventures are vastly different to typical residential development projects, and the needs of residents are very different.
For those who are sufficiently innovative, and prepared to invest in building of knowledge and insight of the accommodation and service needs of older people, there is significant potential upside. This is a necessary investment because successful seniors living developments are about more than the property itself; they are also very much about the long term operations, the business model and the value proposition to the targeted market.
PROJECT CHALLENGES
Although there are some challenges associated with the increasing interest in senior living in Asia, they will naturally be overcome as the market matures. It is good to recognise these challenges as this will assist in overcoming them. It will be a challenge, for example, for participants in this new market to educate themselves about the specific differences between typical residential developments and senior living projects. Whilst there are many similarities, there are also many important differences that must be learned in order to achieve successful outcomes.
This is also a challenge for advisors, consultants, and existing operators who are involved in the senior living market in Asia, in terms of understanding the cultural differences, the fact that it is not possible to simply replicate the models used in their home country, and the need for development of appropriate business models relevant to each culture.
Another challenge for each country that is developing an interest in this market is acknowledging and understanding contemporary approaches to ageing and older people. It is almost counter cultural in some countries across Asia that older people might be interested in maintaining their lifestyle interests (such as travel, entertainment, arts, wellness, etc) and will have increasing wealth to afford to live independently for many years. In this context, ageing is definitely not an illness requiring 24/7 medical services.
Furthermore, a person’s age alone is not an indicator of their health or their ability to participate in activities associated with normal living. In fact, the evidence is as such- the more people are encouraged to participate in wellness and activity programs, the more likely it is that they will extend the phase of their life that they have the physical and mental capacity to remain involved in community and participate in life.
Understanding ageing will also help cater to another illness associated with ageing; dementia. It is a reality that despite extended expected life expectancies and heightened attention to healthy lifestyle and diet, there is also increased incidences of dementia, developing at earlier ages. This is a major issue for any nation, however, the challenge in Asia will be to develop environments that encourage improved quality of life for residents: active participation and engagement in community, and other residents, rather than traditional models of containment and restricted movement.
OPERATIONAL CHALLENGES
As interest in the development of senior living projects emerge, there is a growing need for the introduction and involvement of operational expertise. As important as it is to understand the unique elements associated with senior living and aged care projects from a property perspective, it is also critical to develop knowledge of the relevant business models and operational methodologies suited to each market. A corollary of this is the associated challenge in developing operational expertise, especially since it is often assumed that experienced, branded operators from countries with well advanced senior living industries will fill the gap. However, this assumption that operators from Australia, USA or Canada will be automatically be interested to bring their operational models and invest in expansion into Asia is unsupported. The reality is that it is a challenge to find operators with an interest in such expansion, especially since they have both challenges to address and significant profitable opportunities to pursue within their own domestic market. This creates a need to explore other operational solutions. This is likely to lead to the organic development of operational expertise in some cases, whereby the development entity takes a strategic decision to invest in the procurement of knowledge and intelligence associated with their own operational brand. This is likely to be a response to this operational challenge in Asia as the barriers to entry of this market are not very high. Hence, adopting a carefully planned and executed strategy can ensure success.
CREATING MARKET BUZZ IN ASIA
Apart from the excitement around local entities developing their own operational expertise and the development of a new wave of contemporary senior living projects that reflect the principles noted above, there is a genuine buzz associated with potential involvement of new investment funding into this sector. It is clear, for example, that there is a need for an investment model into aged care and seniors living that is not just associated with the short term development phase, but cognisant of the benefits associated with long term investment. This requires a significant mindset shift by funding institutions in recognition that aged care and senior living investments are an asset class in their own right- worthy of serious consideration as a long term, low risk investment and therefore, with lower return application of funds. This will create opportunities for major investment houses to become involved in the sector, and have significant implications for the business models that can be applied to different projects. Currently in most seniors living projects, the approach is similar to a residential development in that there is a requirement for the inflow of capital contribution to cover the development cost and provide the owner of the asset with a margin on that amount. This approach underlies the inherent character and long term nature of senior living developments.