With aged care developments booming, growth from the aging population is providing new opportunities for builders and developers who are ready to deliver strong results for increasingly corporatised residential-care operations.

The number of older Australians is growing steadily - in 2017 some 3.68 million are aged 65 or over, up 664,473 from 2011 , with another 1,300,000 aged 60 to 64 and soon to reach retirement age. All of these citizens will need somewhere to live and be looked after. The Government's aged-care expenditure from fiscal 2013-14 (when expenditures were $12.8 billion) is projected to reach $26.4b in fiscal 2023-24 . 

Government support

Traditional government levers - such as increasing the means-tested payments for residents in new or significantly refurbished homes - have driven growth in building activity : over 200 organisations have applied for approved provider status in 2017, compared with just 75 in 2016 .

All are seeking to cash in on a development boom stemming from government efforts to boost aged-care placements - from 113 places per 1000 people in 2012, to 125 per 1000 by 2022.v 2017 saw the injection of $64m in capital grants and the addition of 9911 residential aged care places in the 2016-17 Aged Care Approvals Round .

Growing investment in residential-care projects means large commercial operators are building new facilities as quickly as they can secure appropriate space and funds. March 2017 alone saw $340m in aged-care building approvals , just one step towards the $33b in total investment required to meet demand over the next decade.

Total spend on aged-care building activity was $4.5 billion in fiscal 2015-16iv, with rationalisation and efficiency targets driving up the number of residential-care places from 195,825 places across 949 residential-care providers. Increased residential-care activity means that demand for health care, multi-generational living, aged care facilities and senior friendly spaces will likely be high, and developers should be ready to identify and move on new opportunities quickly.

Profitable venture 

With big rewards for successful players - net profit for the sector grew from $907m in 2014-15 to $1.1 billion in 2016 - it's no wonder that many developers are targeting the aged-care sector as a growth market in the face of softening apartment approvals. Yet succeeding in aged care requires more than just fighting for tenders, warns one long-time industry player who says aged-care success favours construction partners who are ready to play the long game.

"Some developer-builders might throw facilities together fairly quickly as a turnkey development and not care too much about the products they put into them," says Mark Selby-Hele, managing director of Melbourne-based Aged Care Developments. "But we're building for end users who want a facility to be of a certain standard and quality, so they're not having to replace things like toilet cisterns or tapware after a few years."

Quality has been one of the many keys to success for Selby-Hele, who has worked on nearly 50 aged-care developments since he entered the industry in 1990. In that time, he  says he has seen the industry's demographics reshaped by increasingly onerous "red tape" and local regulations and the displacement of mum-and-dad operators by larger aged-care operators that, he says, typically need from 600 to 1000 beds to turn a profit.

"Council Planners along with new layers of regulations are making life harder than it used to be," he says, noting that authorities "keep throwing up obstacles. Operators are a lot more selective about who they want to do their work for them: most of them are in it for the long haul and want something that's going to withstand the rigours of staff use and abuse. So, people derive a fair bit of confidence in dealing with someone that has been doing this for a long time."

That poses challenges for builders and developers seeking to pivot into the market - but such obstacles are not insurmountable. New entrants may not have the aged-care credentials of their rivals, but a history of dealing with complex state and council regulations may strengthen their credentials as problem-solvers.

Having a reliable bank of tradespeople is also an asset, particularly if they have worked in aged care before and are aware of the many industry-specific requirements around issues like disabled access, medical services, and so on.

Stand out from the crowd

Given the increasing competitiveness between aged-care operators, there is value to be had for those that can develop distinctive designs with notable amenities; support "age-in-place" care that responds to residents' changing requirements; and foster a positive image in a sector that has often struggled to maintain good PR.

It's also crucial to remember that aged-care developments are much longer-term commitments than conventional turnkey deals: many projects run two to three years from the point where applications are lodged to the point where the facility is finished. Many aged-care builders will benefit from being part of integrated projects like NSW's $2.2b Ivanhoe Estate , which also includes over 3000 new dwellings, a supermarket, cafes, exercise stations, and community gardens.

A lot can happen over a few years, particularly as financial objectives are adjusted and the entrance of new types of investors  change building strategies to maximise returns. With returns and expansion activity increasing at a healthy clip, developers can secure a healthy slice of the pie by building relationships with aged-care providers based on strong partnerships, good quality, innovative designs, and cost-effective delivery.

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