Article | Intelligent Investment
Vacant residential aged care and retirement homes: Where to from here?
Vacant aged care facilities are proving an attractive proposition amid rising construction costs; and it’s not just aged-care operators who have noticed.
August 18, 2022
Innovative design concepts and technologies are shifting the needle in Australia’s aged care property sector. A focus on improving the built environment in the wake of the Royal Commission into Aged Care Quality and Safety is also driving change and underpinning rising interest in vacant facilities with upside potential.
Over the past 12 months, numerous vacant aged care homes have transacted – many at below replacement cost.
Sandro Peluso, Director of CBRE’s Australian Healthcare & Social Infrastructure team, says existing aged care operators are leading the charge given the substantial costs involved in undertaking new development projects.
“Aged Care construction costs are substantial, which creates an incredibly high barrier to entry. From a developer’s perspective, projects are rarely feasible, with construction costs ranging anywhere from $200,000 per bed to north of $350,000,” Peluso says, adding that development compliance is strict and homes must be built to a Class 9c standard.
Against this backdrop, the ability to buy an existing, vacant home is an attractive option, allowing aged care providers to undertake refurbishment works and re-licence facilities for the elderly and care dependent.
“In a number of cases, providers have conducted multi-million-dollar renovations that have rendered properties near unrecognisable, significantly increasing the standard of living and ability to administer care for residents,” Peluso notes.
Rehabilitation and mental health care providers are also pursuing vacant care homes, which can be converted to meet modern hospital standards.
While hospitals must have a 9a classification, as opposed to the 9c standard for aged care facilities, Peluso says this is not insurmountable and typical changes involve areas such as fire protection systems.
Specialist Disability Accommodation (SDA) and National Disability Insurance Scheme (NDIS) providers are also scouring the market for opportunities, often working with developers and investors, amid ongoing funding increases and the release of new home care packages.
Notes Peluso, “These providers are generally focused on converting aged care homes into apartment-style complexes, as they typically already meet the required standards from an access and compliance perspective.”
While less frequent, some buyers also looking to convert facilities - either partially or fully - into medical consulting hubs while in other cases, medical centres are being integrated into aged care homes.
Peluso says another consideration - and one with considerable social upside - is the ability to utilise vacant facilities for charitable uses while redevelopment plans are being approved.
“It can be many months and sometimes years that a former aged care home remains unoccupied,” he says.
“Given the relevant approvals, this opens the door for these facilities to be used for a range of uses such as transitional housing, hospices and shelter for woman at risk of homelessness or domestic abuse – providing positive outcomes ahead of these homes getting a new lease on life.”
Over the past 12 months, numerous vacant aged care homes have transacted – many at below replacement cost.
Sandro Peluso, Director of CBRE’s Australian Healthcare & Social Infrastructure team, says existing aged care operators are leading the charge given the substantial costs involved in undertaking new development projects.
“Aged Care construction costs are substantial, which creates an incredibly high barrier to entry. From a developer’s perspective, projects are rarely feasible, with construction costs ranging anywhere from $200,000 per bed to north of $350,000,” Peluso says, adding that development compliance is strict and homes must be built to a Class 9c standard.
Against this backdrop, the ability to buy an existing, vacant home is an attractive option, allowing aged care providers to undertake refurbishment works and re-licence facilities for the elderly and care dependent.
“In a number of cases, providers have conducted multi-million-dollar renovations that have rendered properties near unrecognisable, significantly increasing the standard of living and ability to administer care for residents,” Peluso notes.
Rehabilitation and mental health care providers are also pursuing vacant care homes, which can be converted to meet modern hospital standards.
While hospitals must have a 9a classification, as opposed to the 9c standard for aged care facilities, Peluso says this is not insurmountable and typical changes involve areas such as fire protection systems.
Specialist Disability Accommodation (SDA) and National Disability Insurance Scheme (NDIS) providers are also scouring the market for opportunities, often working with developers and investors, amid ongoing funding increases and the release of new home care packages.
Notes Peluso, “These providers are generally focused on converting aged care homes into apartment-style complexes, as they typically already meet the required standards from an access and compliance perspective.”
While less frequent, some buyers also looking to convert facilities - either partially or fully - into medical consulting hubs while in other cases, medical centres are being integrated into aged care homes.
Peluso says another consideration - and one with considerable social upside - is the ability to utilise vacant facilities for charitable uses while redevelopment plans are being approved.
“It can be many months and sometimes years that a former aged care home remains unoccupied,” he says.
“Given the relevant approvals, this opens the door for these facilities to be used for a range of uses such as transitional housing, hospices and shelter for woman at risk of homelessness or domestic abuse – providing positive outcomes ahead of these homes getting a new lease on life.”