What’s next for Australia’s aged care services market after 18 months of forecast change? Taking centre stage are new mixed-use health and wellbeing precincts as former aged care facilities get a new lease of life.
These vacant aged care homes are presenting opportunities for alternate use operators including rehabilitation, Specialty Disability Accommodation, National Disability Insurance Scheme providers, medical centre, consulting suite operators and mental health and wellbeing services, as the country continues to embrace the challenges of continued and longer lock-downs and a rise in mental health concerns.
Key players in the market include syndicates of doctors and specialists with stakes in their businesses, who are unlocking the value in former homes by repurposing them into precincts that bring together like-minded tenants offering complementary and specialised health-related services.
These groups are targeting existing premises that meet their requirements and offer access to short stay accommodation and rehabilitation facilities that are compliant or offer the capacity to be repurposed as such and often have high-quality existing fit outs and standards that would otherwise be unattainable.
Buying and converting these existing facilities also comes at a much lower cost than undertaking a new development.
For example, a 15-year-old, 75-bed aged care home in Northcote recently hit the market with a $9 million plus price tag via CBRE. To build this same facility today would cost above $15 million, so you can see why smaller health services groups are attracted to these sites and are capitalising on their existing infrastructure.
Another example involves the former Wakefield Hospital and adjoining Wakefield Clinic in Adelaide. This facility was recently sold, and the existing spaces are being marketed for lease, with the former emergency department now positioned as a healthcare hub within a vibrant mixed-use precinct that will include numerous medical centres, specialists, and hospital/rehabilitation users together with retail childcare and aged care groups.
Investors considering these health-related property investments need to be savvy and highly competent as the healthcare market is highly specialised and has strong barriers to entry.
For instance, if investors are considering purchasing an established aged care home and continuing with its existing use, the age of the facility and its maintenance history are critical factors.
In most cases, experienced residential aged care operators adhere to a strict maintenance and refurbishment schedule, particularly for homes located in metropolitan areas. This is primarily for residential quality of life; however, it also ties in with the ability to secure higher levels of government funding.
Set against this are the substantial construction costs to build a new aged care facility, which can range anywhere from $200,000 per bed to north of $350,000 (subject to quality), which is why purchasing an existing site can be appealing.
So, to conclude, there are major opportunities in the aged care and health services property sector. As outlined above, it’s an evolving, dynamic sector, but it’s also important to consider all the factors at play as you make your investment decisions.