Global Awards News

LONDON: The retirement sector is facing a major opportunity and hurdle in the impending generational shift from the “grateful generation” to one with far more discriminating tastes.

The key, according to one analyst, is to “facilitate denial” that retirees are ageing.

Until recently, retirement village providers benefited from a period of seemingly neverending growth and, if so inclined, being able to provide some pretty bare-bones facilities and homes

Retirement villages, with an average entry age of 75 to 80, are working through the last of the silent generation, born between 1928 and 1945, whom they have done so well off.

They are now facing the baby boomers, the largest and most financially successful generation.

On paper this is fantastic for the likes of Ryman, Summerset, Oceania and other major builders of retirement villages – the population trend is there and the money is right.

There is also a seemingly low penetration rate for retirement villages in New Zealand, sitting at 14 percent of the age group.

But according to retirement advisory Ansell Strategic’s Cam Ansell, it’s just not that simple.

“Normally when people want to talk about aged care or retirement living, including people that invest in it, they jump too quickly to the quantum of people and sort of say, ‘oh, look, it’s really exciting, you’re going to get a doubling of demand or trebling of demand because of that big bulge in the population’.

“They’re not thinking about the character of those people, and not realising that while a lot of the stuff that we’ve got at the moment is OK for the current generation, but for the next generation of people, it ain’t going to cut it.”

He said the history of aged care and retirement living tells you almost nothing about what’s coming.

“People that have been going to retirement villages and nursing homes historically are not the baby boomers, they’re the parents of the baby boomers, the pre-World War II generation, and generally those people could be characterised as being relatively grateful.”

Ansell, who works across Australia and New Zealand, said this generation had been largely accepting of modest accommodation.

“The next generation, the baby boomers, are the architects of consumer choice, and by and large, they are not grateful. They don’t like things that are homogeneous or dated.

“They are heterogeneous as a people, and so the things that we provide for them as accommodation in retirement villages and services in aged care when they get to that has to be fitting and tailored for them individually.”

Metlifecare’s sales and marketing manager David Martin said traditional retirement village customers had lived through the depression and post-war times and generally accepted their lot in life.

“Baby boomers and even older Generation X are a generation that is more financially literate and they want what they want, not just what was given to them,” Martin said.

“They don’t want to settle for what was traditional retirement age here, they want more lifestyle choice, they want activity, they want to be who they are in the village.”

The company’s head of retirement strategy Jill Birch said the new generation heading toward retirement villages wants to be in control more than their predecessors. “These are people that were picketing in the 60s … they want their voice to be heard and they’re in control and they will now tell us what they want and they absolutely do.

“That started in independent living and it’s definitely coming through now into aged care and they are happy to pay for more premium-aged care services that are much less institutionalised than what has been delivered in the past.”

Metlifecare is targeting this by providing retirement village-style occupation agreements for higher levels of care, which are traditionally funded through an increasingly inadequate government funding model.

Ansell said the bulk of existing retirement villages were pretty homogeneous big canvas models.

According to JLL’s most recent Retirement Village database report, released in August 2023, there are 39,070 retirement village units in New Zealand and an estimated 50,791 residents (an occupation rate of 1.3 residents for each unit).

New Zealand is considered to be a world leader in the retirement living industry, but a lot of these units aren’t the perfect offering for the incoming generation.

Though older retirement villages would occupy an affordable niche, Ansell said the success of retirement products in the future would hinge on the “facilitation of denial”.

Ansell said a good facility would feel like an apartment block or broad acre community, but with a conscious effort towards making apartments, houses and units that look different.

“All of that is trying to create the sense that you’re moving into a home, not into a compound or closed community of old people.

He said the faster these develop, the more redundant they make the ones stuck in yesteryear, which will target individuals who can’t afford to get into the ones “that are facilitating denial”.

Though NZX-listed retirement village company Summerset is planning for the next generation, its chief executive, Scott Scoular, said human needs driving the retirement sector wouldn’t change.

“Research we’ve done in the past shows safety and security and wanting companionship are the massive drivers behind people’s decision to come into a village.

“Safety, security and companionship don’t really change. The thing you’ll probably see change the most is the expectations around their vibrancy of life and that wellness offering.”

The wellness offering includes gyms on site, activities programmes and massages. “Ten years ago we didn’t have gyms, now we’ve got gyms in every village,” said Scoular.

Metlifecare’s David Martin said the company was becoming increasingly deliberate in where it was buying land and increasingly deliberate around what they put on the land to fit the surrounding area and demographics and provide a tailored experience.

The answer for the older facilities is harder to provide.

Ansell said substantially renovating retirement villages was difficult, as residents had a right to occupy their units and couldn’t be shifted on easily.

This means the operator may have to wait many years to reach a level of vacancy that allows for meaningful construction, or otherwise look to sell assets that don’t fit their portfolio.

Scoular said the introduction of amenities outside of rooms could raise the general level of villages, including the construction of restaurants on site.

“Four or five years ago we put in cafes in all our villages, and the uptake has been really strong … I think we might see those cafes evolve into restaurants that can provide fine dining.

“What you’re doing is modifying those peripheral pieces over time to meet that changing resident expectation.”

Though a lot of focus goes towards providing the cutting edge in retirement living, Martin said Metlifecare’s older units were the most in-demand in its portfolio.

“A new village will be built larger, and that’s purely for business reasons. It’s more cost-effective to build more in a village, whereas some of our older villages are much smaller, you know, they might only have 90 or 100 units and that price point is usually a lot lower than a brand-new build.”

Birch added not everyone wanted that cutting edge. “Not everyone wants to live in the latest design, they want it to feel like their previous home, not necessarily flash.”