Long-term demand for retirement villages remains strong: What it means for mid-tier developers

With the recent media attention about losses, land scales and scaled-back development pipelines for one of New Zealand's largest retirement village developers, questions have been asked about whether the market is beginning to soften. 

BDO Advisory Partner and Retirement Village & Aged Care sector specialist, Tim Coughlan, believes the long-term opportunity remains strong. In his view, current conditions may create a window for well-prepared mid-tier developers, particularly while some larger operators are consolidating and softer construction conditions create more favourable land-buying opportunities.
 

“What we’re seeing in the market right now is a pause and reset from some of the larger operators, not a reduction in demand. New Zealand’s ageing population continues to support long-term demand for retirement village living and aged care services. That underlying need has not changed.” 

Tim believes this creates the perfect opportunity for new mid-tier developers to enter the market to fill the supply void; with demand not forecast to peak until 2048. He continues:
 

“For developers and investors, the opportunity is real, but this is a highly specialised sector. Development risk sits alongside responsibility for vulnerable people and a heavily regulated operating environment, so it is important to bring the right advisers, funders and operators into the process from day one.”

 

A sector resetting after a period of rapid growth 

Recent sector results point to a shift in strategy among some larger operators, with development activity being reduced, selected land holdings sold, and greater focus placed on cash flow and balance sheet resilience.

This follows a decade of rapid expansion across the sector, when many large operators increased build rates to meet growing demand. In Tim’s view, the current pullback reflects the balance sheet pressure created by aggressive growth and higher development risk, rather than a deterioration in the long-term demand fundamentals underpinning the sector.

Sector data currently points to relatively stable operating conditions, with occupancy levels and revenue trends holding up despite broader economic pressure. 
 

“The retirement village sector is closely connected to the residential property market, because many future residents need to sell their home before moving into a village. Recent weakness in some regional housing markets has naturally slowed decision-making in parts of the country. However, that is different from a structural reduction in demand. It reinforces the importance of matching the model, pricing, staging and risk profile to the local market.”

 

Demand fundamentals remain firmly intact 

The long-term drivers of retirement village demand in New Zealand remain unchanged. The country’s population is ageing, and demographic pressure is expected to continue building through to 2048. That means demand for retirement living has not yet reached its long-term peak.

This demographic shift is already translating into strong demand for retirement living. Current projections indicate: 

• More than 112,000 New Zealanders may require retirement accommodation by 2048 
• The sector is facing a bed shortfall with up to 8,000 more beds needed by 2030 
• Occupancy rates of around 90 percent reflect consistently high utilisation across existing villages 

Even in the context of a slower housing market, enquiry levels remain strong and many operators continue to experience sustained interest from prospective residents.  
 

A widening gap between supply and demand 

While demand continues to build, the pace of new development has begun to slow. Large operators are becoming more selective about new projects as they work through balance sheet resets and capital constraints. At the same time, development activity across the sector is not keeping up with projected population growth. This dynamic is creating a widening gap between supply and demand. 

From a market perspective, this has several implications: 

• Increasing competition for quality units in established locations 
• Potential for longer waitlists and reduced availability over time 
• Greater importance placed on well-located, well-designed new developments 

For developers and investors, this imbalance highlights the scale of the market’s long-term capacity challenge. 
 

“The demographics are clear. New Zealand is moving through a significant ageing population shift as the Baby Boomer generation enters retirement. Many in this generation have built up wealth through housing and other assets, which means they can make lifestyle choices around security, companionship, care and community. For the right projects in the right locations, that creates a strong long-term demand story.”

 

A window of opportunity for developers

With long-term demand still building and some of the largest operators slowing or stepping back from new village development, current conditions are creating a compelling opportunity for well-structured new projects and selective expansion. 

With some of the largest operators slowing their rate of expansion, there is an opportunity for: 

• Single-site developers and investors looking to enter the sector 
• Existing providers seeking to expand their footprint 
• Investors exploring long-term, demand-backed assets 

 

“The next phase of sector growth may not be led only by the traditional large operators. We are likely to see a broader mix of developers, operators and capital partners considering the market. However, the specialised nature of retirement village development means diligence is critical. The right structure can help manage risk, but only if the project is tested properly from the start, including feasibility, funding, staging, demand, pricing and operating model.”

 

Structuring developments for long-term success 

While the opportunity is compelling, recent market conditions have highlighted the importance of getting the fundamentals right from the outset. 

Developing a retirement village is capital intensive and requires careful planning across multiple dimensions. Tim is seeing several factors consistently shape project viability in the current market, including: 

• Capital structure and funding strategy. Ensuring projects are appropriately structured and leveraged; included ensuring you are partnering with the right capital providers and banking providers.
• Phasing and staging of development. Aligning build programmes to build-to-demand while managing cashflow and facility headroom levels (noting the village sales process is materially different to that of buying a residential property). 
• Risk management. Ensuring the village design and proposed village types and associated prices match the local market, and that sufficient demand exists.
• Operational integration. Designing & planning for care facility services upfront to ensure that the village will eventually offer a ‘continuum of care’ to its residents to de-risk project long term. 
• Cost and delivery risk management. Managing construction cost pressures and supply chain variability.

Developments that are structured with these factors in mind are more likely to remain viable across economic cycles and support sustainable long-term outcomes for residents, operators and investors.
 

Looking ahead 

The current slowdown in development activity should be viewed in context. It reflects a period of adjustment following rapid expansion and growing balance sheet pressure at parts of the market, rather than a fundamental weakening in the retirement village sector. 

For developers considering their next move in this market, the opportunity lies in responding before demand peaks and while some larger operators remain out of the new village development market. The key challenge is not whether long-term demand exists, but how to structure projects so they remain resilient through changing economic conditions. Robust planning, capital discipline and the right advice can make a material difference.
 

How BDO can help 

BDO works with developers, investors and operators across the healthcare and retirement living sectors to support sustainable, well-structured growth. 

Our support includes: 

• Feasibility modelling, risk management and scenario analysis 
• Capital structuring and debt funding advice 
• Tax and transaction structuring 
• Operational and performance improvement 
• Ongoing financial and strategic advisory through the course of the project

In a sector where long-term fundamentals remain strong but execution risk is significant, early advisory input can help ensure projects are structured for sustainable success. If you’d like to speak more about whether this could be the right option for you, reach out to Tim Coughlan or your local BDO adviser.