By Grant Gilbett, National Head of Retirement and Health Care, Valuation & Advisory Services, CBRE Ageing populations and retiree wealth drive senior living demand.Rapidly ageing populations and retirees’ growing wealth are driving strong demand for senior housing in several of Asia Pacific’s developed markets.This is attracting investors seeking higher yields than those traditionally found within core property sectors, with CBRE’s annual Asia Pacific Investor Intentions Survey consistently tracking strong buyer interest in senior housing. Senior housing scale, format and development vary widely across the region, with Australia the region’s largest senior housing market: With the proportion of Australia’s population aged 65 years and over increasing from 12.3% in 1999 to 15.9% in 2019, Australians are living longer and healthier lives than ever before. While health-related issues are often a catalyst, many well-funded retirees are increasingly looking to downsize from large, maintenance-intensive homes to simpler accommodation providing a range of services and amenities. This has spurred growth in demand for retirement living, which is broadly defined as a structured community for the elderly that provides safe homes, a reduced cost of living and neighbourly companionship. The retirement living market is highly fractured, with operators ranging from traditional developers with large portfolios such as Stockland and Lendlease and other for-profit owner-operators, as well as smaller not for profits. Recent years have seen more investors and funds entering the space in search of higher yields, with Brookfield’s AUD 1.3 billion purchase of Aveo Group, Australia largest retirement village operator, in 2019 a transaction of note. Other major deals include Dutch pension fund APG’s acquisition of a percentage of Lendlease’s retirement living business in 2017.While there are few exceptions such as New Zealand-based Summerset and Ryman Healthcare, which are investing heavily in acquiring new sites, new entrants often struggle to access the market due to a lack of opportunities to acquire assets at scale and the time and upfront capital required to build out facilities.Payment models are inconsistent and vary according to the operator’s not-for-profit or for-profit status. Not-for-profit operators typically follow a Deferred Management Fee (DMF) model based on entry price. For-profits adopt a DMF calculated on a mix of either entry-based or exit-based pricing, whilst also potentially offering a share of any capital gain over the period the resident resided in the community.The format of retirement villages differs across Australia’s seaboards, with properties in northern areas such as Queensland focused around water sports and other outdoor activities, and southern states such as Victoria featuring more indoor environments.Following the onset of the COVID-19 pandemic, many operators were commended for their quick and effective response in locking down villages to ensuring residents’ safety, which has strengthened sentiment towards the sector.Other key trends at present include growing competition from manufactured housing estates, which involves operators renting sites for relocatable homes to residents.Ageing populations and a heightened appetite to invest in alternative sectors and operating assets will continue to provide opportunities for investors in Asia Pacific to partner with experienced operators to enter or expand into this growing and undersupplied sector. This article highlights just a few of the vagaries within operating and management structures, governmental regulations and strategies, and senior housing formats in some of Asia Pacific’s developed markets.Considering the complexity of these elements, investors contemplating adding to their exposure to this sector require substantial support and the highest level of skill, expertise and understanding from valuation professionals, such as those at CBRE.