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  • China Senior Housing Market Attracting More Private Investors

China Senior Housing Market Attracting More Private Investors

July 30, 2012
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Ageing demographic and high-level policy support solid long-term demand

30 July 2012, Hong Kong - ¾ China’s senior housing market is attracting an increasing number of private investors and developers, although the majority of senior housing institutions are currently operated by government agencies and public institutions, according to CBRE’s latest report, “Senior Housing in China: A Market in the Making”. While the sector offers significant investment potential, private sector developers face challenges in identifying the right, commercially viable opportunities.

The senior care industry in China is still at the very early stages of development, with just about 100,000 senior housing institutions. As China’s population continues to age and demand for elderly housing increases, the government has begun formulating a long-term plan to foster development in the senior housing market. Specifically, they are looking to boost the supply of beds provided by institutional retirement homes from 3.5 million (as of the end of 2010) to 6 million by the end of 2015.

Currently, among private investors in the China market, domestic developers and insurance companies are the most-active first movers. Leading domestic developers are building track records developing homes for the elderly, and small developers are attempting to establish a niche in this segment. Active since 2009 following regulatory changes to allow property investment, insurance companies started investing in senior home development projects. Foreign investors are also seeking opportunities, although private equity funds remain hesitant to enter the sector given the limited number of completed projects to invest in at this stage.

Despite strong interest among private entities, the majority of senior care institutions are publicly operated. According to a survey conducted by CBRE Research on more than 1,300 existing institutions in Beijing and Shanghai, government-funded nursing and welfare homes account for 80% of the total. Private nursing homes account for 11%, and senior apartments and private retirement communities for 9%.

In terms of location, approximately 80% of facilities are in urban or suburban areas within an hour’s distance of the city centre, with most reporting full occupancy. Institutions offering high-level care to residents are limited in the public sector; most serve the independent or assisted living segment. Moreover, more than 80% of the institutions surveyed provided 200 beds or less per housing scheme — typical of elderly housing institutions in China. However, private senior apartments similar to those in the U.S. that can accommodate circa 1,000 residents are emerging. These largescale projects will still take time to gain acceptance in China.

In terms of pricing, public nursing homes and social welfare homes have adopted a similar pricing model to private nursing homes. These types of institutions essentially charge affordable rents on a monthly basis and require additional payment for services and meals. Meanwhile, high-end projects in the form of senior apartments and Continuing Care Retirement Communities (CCRCs) have adopted a sales model similar to mainstream residential projects. However, private operators have yet to develop a successful business model for the mass market.

“Over the next two decades, the rate of ageing in China will be at its fastest and social stability and senior housing will remain key topics of focus,” said Ada Choi, CBRE Director of Research, Asia Pacific. “ Despite the challenges that always exist when entering a new market, interest among investors and operators in the senior housing sector will likely increase, as the demographic shift and high-level policy direction support solid demand in the long term.”

Frank Chen, CBRE Executive Director and Head of Research, China, added, “Over the next three to five years, more senior housing projects will be launched with a more defined and developed model with regard to size, design, operating format and physical location best suited to the China market. As key players engage the market, mitigating potential challenges by conducting through market studies will be vital to their success.”​​

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Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.​

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