It is quite common to hear that many developed countries are facing the issue of aging population. A United Nations report found that 1 in 10 people worldwide was 65 years old or older in 2021. This group is projected to account for 1 in 6 people globally by 2050. There may be limited resources to rely on either family members or helpers, which drives the need for even more eldercare facilities, providing opportunities for Real Estate Investment Trusts (“REIT”).
One major country facing this issue is China, where according to the article below, 21.1 percent of China’s total population, approximately 297 million people, were aged 60 and above in 2023. The number of seniors in China is also expected to reach about 400 million in 2035.
Photo source: https://pbbell.com/2020/10/29/designing-modern-senior-living-communities/
Data from the National Bureau of Statistics of China indicated that there was a total of 41,000 registered senior-living institutions, providing about 8.2 million beds last year. This covers approximately 3 percent of the China population that are aged 60 and above in 2023. Given the opportunity, on 31 May 2024, Keppel has announced that they have officially opened its first senior-living facility in Asia, a project in Nanjing, China.
Website: Keppel sets sights on senior-living market, opens its first facility in Asia
The Nanjing facility is Keppel’s flagship project for Sindora Living, the asset manager’s senior-living brand and operating platform for Asia. This China development will serve as a “launchpad” for Keppel’s expansion into other senior-living markets in the region, where fast-growing ageing populations have generated soaring demand for “quality senior-care services”. This kicks off the company’s expansion plans for the region.
Keppel have also disclosed that when the assets are stabilised, they can consider to inject them into a REIT, where Keppel can continue to earn asset management fees as the REIT manager. This may provide opportunities for retail investors to investor into the senior living market.
ParkwayLife REIT (“PLife”) has been looking to build a 3rd market to contribute and enhance their growth for the mid to long term. PLife is a specialised REIT where they have hospitals, nursing homes, and a medical centre. Additions of senior living facilities will not be vastly different from their existing portfolio. With a gearing of 36.4% as of 31 March 2024, there is some headroom for them to consider venturing into the China senior living industry as currently the supply can only take care of 3 percent of the target market.
Keep in mind that it is not without risks. There is still uncertainty relating to China’s housing market. While the housing market is not directly related to properties of the other industries, there may be spillover effects which may create issues for investors or REITs venturing into the market. Even with strong fundamentals, any investment can still be influenced by the environment, as many Singapore REITs with China exposures saw decreases in their portfolio value due to a weaker market and currency depreciation against SGD.
Website: China’s property crisis sees homeowners scramble to pay off mortgages at record pace
Nonetheless, from the above there appears to be gap that healthcare REITs could fill and provide the necessary senior living facilities. They could build on their existing capabilities to provide quality care for the elderly, and this knowledge and expertise can then be utilised in other markets when the need or opportunity arises.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
