When Parliamentary Budget Officer Kevin Page sounded alarm bells over Canada’s looming grey-haired demographic onslaught recently, many people across the country wondered where the federal and provincial governments would find the $46-billion he said is needed this year alone to account for the burgeoning number of retirees.
That investment, he said, was necessary to prepare for the impending burden on the health-care system and to bolster dwindling revenue as the number of taxpayers shrinks.
But there is another issue: how to pay for the surge in retirement facilities needed to accommodate the generation born between 1946 and 1964.
According to Statistics Canada, the country’s senior citizenry is projected to surge from 14.4 per cent of the population this year to 24 per cent by 2041– putting extraordinary pressure on the current 198,739-unit supply of seniors’ housing currently on the market.
In fact, a recent KPMG report predicts that Canada will need an extra 104,000 long-term care beds and 52,000 retirement beds to accommodate seniors by 2016 alone, at a cost of $17-billion.
Although the federal and provincial governments have increased funding for seniors’ residences in recent budgets – most government money goes directly to long-term care facilities, with retirement homes typically owned and operated by the private sector – their investment in new spaces will likely fall far short.
That opens the door for independent operators to fill the gap. It’s an opportunity Samir Manji, CEO of Vancouver-based Amica Mature Lifestyles Inc., has been preparing to embrace for years.
“The first wave of the boomers retiring 10 years from now will trigger what we believe will be a 20- to 30-year runway of demand that will be impossible to keep up with, including everything from government-subsidized long-term care spaces to the private-pay independent living market, and everything in between,” he says.
For commercial property firms that specialize in seniors’ housing, this demographic challenge offers major growth opportunities as aging Canadians sell their homes in favour of retirement communities, or move into long-term care facilities due to health-related issues.
But the opportunity isn’t limited to merely providing more spaces for seniors. On the contrary, retirement home operators are also poised to capitalize on the demand for diversity in rental unit supply, not to mention the shifting preferences of elder Canadians.
“Companies today are looking at some of the changing attitudes of how to meet the needs of seniors,” explains Tom Rothfischer, a Toronto-based partner in KPMG’s building and construction practice. “There’s a subset of providers out there who believe they can provide new stock to the market and get greater share of the market as a result.”
John O’Bryan, vice-chairman of commercial property consultancy CB Richard Ellis in Toronto, points out that within the four categories of seniors’ accommodation – long-term care for those in need of major assistance, independent living, assisted living and rent-controlled seniors’ apartment buildings – trends are now pointing towards constructing units that range from the studio-sized apartments common in many retirement homes today to high-end, multi-room suites at higher price points.
As he explains, baby boomers retiring in the next five to 10 years will boast varying levels of physical health and wealth – and will insist their varied needs are catered to at every turn.
As a result, he says, retirement-home operators are now planning campuses they can usher seniors into at a younger age. Mr. Manji puts the average current Amica resident at about 82. He predicts that age will drop to the mid- to late-70s in the coming decade, in the hope younger seniors, as they age, will move to different sized units, or into nearby buildings offering greater assistance with tasks (such as cooking or bathing).
For Toronto-based operator Chartwell Seniors Housing REIT, which offers accommodation ranging from independent living to long-term care, future growth is also about providing intriguing activities to occupy increasingly-active seniors.
“If you look at the next generation who will enter our residences,” explains Chartwell chief financial officer Vlad Volodarski, “they’re going to be more sophisticated and more health conscious than previous generations.”
That means a need for buildings that feature state-of-the-art exercise equipment and dynamic activity programming. In Mr. Volodarski’s view, seniors now see moving into a retirement home as a chance to remain relevant and engaged.
At Amica, which caters to the wealthier subset of the market, management is betting that boomers’ real estate and investment portfolios will continue to hold their value, enabling the firm’s future residents to afford the $3,500 to $6,000 in monthly fees charged by their residences.
Mr. Manji is confident affluent boomers will pay hefty amounts to live in a retirement community – assuming it caters to their lifestyle needs.
“Most baby boomers swore they would never move into one of the more institutional retirement homes their parents lived in,” he explains.
“Over the last decade or so, we’ve witnessed a paradigm shift to creating environments that are no longer places where you go to die, but … offer the equivalent to cruise ship living on land.”