Living Well

LIVING WELL An investment perspective on Australia’s Retirement Living sector 2025

Aveo Bella Vista Haven Retirement Living, NSW

AUSTRALIAN PROPERTY INSIGHTS

LIVING WELL

KEY TAKEAWAYS

Demographic demand is entrenched Australia’s over-65 population is set to double by 2063, creating an even deeper, long- term demand pool for Retirement Living products.

Current delivery falls short

Occupancy remains at record highs National retirement village occupancy hit 96% in 2024 — the highest on record and a clear signal of market tension.

A sector in transition, not infancy While the sector is maturing fast, delivery capability remains uneven — highlighting a growing gap between investor appetite and routes to market. M&A activity and consolidation represents a strategic opportunity.

In 2024, only 1,339 new Independent Living Units (ILU’s) were delivered — less than 20% of what’s needed to meet demand and maintain penetration rates.

An elevated return profile The discount rate spread between Retirement Living and other sectors, although tightening, represents an opportunity over the next cycle.

Contract models are evolving Operators are expanding beyond DMF to offer prepaid, refundable, and rental options — increasing choice and financial accessibility.

Political support is real Enabling growth in the sector stands out as a bipartisan priority, backed by both major parties for its role providing suitable homes for the elderly.

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SECTOR OVERVIEW

Australia’s Retirement Living sector has evolved into an attractively structured and increasingly investable part of the living asset spectrum. While it shares some characteristics with aged care, it’s better understood as independent living with optional support, wrapped in a financial model that suits both residents and long-term capital.

There is also a lot of opportunity for consolidation in the sector due to its fragmented nature. The landmark acquisition of Aveo by The Living Company earlier this year, Australia’s largest ever direct real estate transaction, illustrates the institutional appetite for the sector and how Retirement Living is becoming a core pillar of Living sector strategies.

At its core, Australia’s Retirement Living Sector operates on a resident-funded leasehold interest model, where the Deferred Management Fee (DMF) enables lower upfront pricing for residents and future revenue realisation for operators. Australia’s model is increasingly viewed favourably by global investors for its mix of attractive qualities – offering scale, tenure stability, and policy alignment.

CHART 1

GLOBAL RETIREMENT LIVING MODELS – STRUCTURAL COMPARISON

Category

Australia

New Zealand

United Kingdom

United States

Sector Size

AUD 45 billion

AUD 14-18 billion

AUD 60 billion

AUD 670 billion

Penetration Rate

4.5%

14.0%

2.2%

10.0% (inclusive aged care) Mature institutional market with REIT participation

Investor Maturity/ Scalability

Emerging institutional presence; high fragmentation presenting opportunity

Highly institutionalised; listed operators

Fragmented; limited investor scale

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Aveo Forest Grove Retirement Living, QLD

OPERATOR LANDSCAPE: STILL FRAGMENTED, BUT SHIFTING Despite some high-profile names, Australia’s Retirement Living sector remains highly fragmented, with more than 700 operators managing over 230,000 units nationally. Institutional players account for a growing share of new supply, but the legacy stock is still dominated by not-for-profits and small private operators, many of which manage only one or two villages. The sector’s structure can broadly be broken into three groups: • Major Institutionally backed platforms - Keyton, Levande, Aveo, Retire Australia. • Private owners - these include sophisticated midscale owners (e.g. Centennial), long-term family owners and private managers with 1-3 villages. • Not-for-profit groups, including Uniting, Baptcare and Churches of Christ, which hold a sizeable share of the sector, particularly in regional locations and lower-income catchments. Consolidation is emerging – particularly via institutional partnerships and private equity-backed platforms and there is plenty of opportunity for more M&A in the sector. Large scale, well managed platforms will bring more consistent service delivery, consumer experience and economies of scale, benefiting operators and occupiers. Alongside the opportunity for M&A, the sector’s underlying fundamentals and capital-light nature remain a major drawcard, particularly as long-term investors seek stable, ESG-aligned income streams and demographic-backed platform growth.

CHART 2

AUSTRALIAN RETIREMENT OPERATOR MARKET SHARE

Aveo

Levande

Keyton

Retire Australia

86%

Rest of Market

- Midscale owners (<10 villages) - Long-term family owners - - Not-for-profits Private managers 1-3 villages

Source: Cushman & Wakefield Research

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DEMAND DRIVERS

Demand is underpinned by one of the clearest demographic trends in Australia – the ageing of the population, but it’s also lifestyle and financial motivations that are shaping where and how seniors want to live. The typical resident is not looking for aged care – they’re looking for retirement autonomy, community connection, and a simpler way to manage retirement.

DEMOGRAPHICS: A GROWING AND SHIFTING COHORT By 2034, almost 1 in 5 Australians will be aged 65 or over, but it’s the 75–85 age group that represents the most active part of the retirement village market, set to grow by more than 1 million over the next decade. While longevity is increasing, so too is the period where seniors seek independent yet supported living – expanding the viable customer base for Retirement Living beyond just the traditional ‘entry point’. LIFESTYLE & AUTONOMY The Retirement Living sector represents a lifestyle choice – one that offers connection, security and routine at a time when many seniors are seeking simplicity and purpose. Tenure data from industry benchmarks suggests that the average Retirement Living stay is 9–10 years, with high satisfaction rates reported among residents. That longevity speaks to the product-market fit, once residents are in, they tend to stay.

FORECAST POPULATION GROWTH IN 65+ COHORT (2023 TO 2063) CHART 3

4% 2% 2%

2022-23

2062-63

65-69

70-74

75-79

80-84

85+

Source: Source: Cushman & Wakefield Research, Intergenerational Report 2023

CHART 4

AVERAGE LIFE EXPECTANCY

85.1

84.6

84.0

83.0

81.8

81.1

80.9

80.5

79.7

78.1

76.2

75.0

1993

1997-1999

2003-2005

2009-2011

2015-2017

2021-2023

Male

Female

Source: ABS

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Aveo Parkside Carindale Retirement Living, QLD

AFFORDABILITY & FINANCIAL STRUCTURING

SHIFTING EXPECTATIONS AROUND HEALTH

Retirement Living offers a financial structure that enables older Australians to access housing suited to their needs without overcapitalising or sacrificing security. Entry prices typically sit 30–40% below the local median house price, allowing retirees to unlock equity from the sale of their home while staying in the same area. The Deferred Management Fee (DMF) is still by far the most prevalent structure in the sector, despite the emergence of new models. DMF enhances affordability by deferring a portion of the cost until exit, meaning residents face a lower upfront burden, which is especially valuable to income-limited retirees who are primarily reliant on the Age Pension. Importantly, this financial model is well understood and widely accepted – around 86% of Retirement Living operates with a DMF of 35% or less, based on industry metrics.

Although Retirement Living is not Aged Care, villages are increasingly providing low-touch health support and wellbeing integration. This is largely driven by ageing-in-place preferences and rising expectations among incoming residents. Many operators now include: • On-site allied health access (physiotherapy, podiatry, GP visits) • Wellness programs such as yoga, hydrotherapy, or group exercise • Home care package facilitation, helping residents apply for and receive government-funded care while staying in their units • Co-located care services, either through Aged Care Facilities or Assisted Living Apartments Operators offering these service elements often benefit from longer average tenure, more stable occupancy, and stronger resident satisfaction scores, reinforcing the investment case for mixed-service models.

CHART 5

AFFORDABILITY COMPARISON – ILU PRICE VS MEDIAN HOUSE PRICE (SAME POSTCODE)

Source: PWC/Property Council (2023)

Perth Metro

Adelaide Metro

Brisbane Metro

Melbourne Metro

Sydney Metro

10%

20%

30%

40%

50%

60%

70%

Source: PWC/Property Council (2024)

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SUPPLY MUST RAMP UP Australia will require around 5,280 new units each year through to 2061 to simply maintain the current penetration rate of 4.5%. But in 2024, actual delivery was just 1,339 units, this gap highlights both the scale of the opportunity and the challenge around increasing delivery. The pipeline is also well short of levels required to maintain penetration rates with just over 7,200 units set to be delivered over the net two years. The relatively subdued supply picture, despite strong demand and appetite from capital to enter the sector can largely attributed to increasingly challenging development feasibility. The mix of high construction costs, ongoing labour shortages, and elevated funding costs have all weakened the pipeline, despite high occupancy and solid price growth in existing villages. SUPPLY SNAPSHOT

A clear trend with the pipeline is the increasing prevalence of vertical or multi-level schemes which drive density and improve feasibility for investors while providing occupiers with proximity to urban centres. STRONG OCCUPANCY UNDERSCORES LATENT DEMAND Occupancy levels provide a strong signal of sector demand and resilience – and current metrics are striking. National occupancy reached 96% in 2024, the highest rate since industry tracking began in 2014. Driving this strength are both structural and cyclical factors.

CHART 6

PROJECTED RETIREMENT LIVING SUPPLY (2025-27)

2500

2000

1500

1000

500

NSW

VIC

QLD

ACT

Source: Cushman & Wakefield Research, PWC/Property Council (2024)

CHART 7

RETIREMENT LIVING OCCUPANCY (2014–2024)

82 84 86 88 90 92 94 96 98

2014 2015

2016 2017

2018 2019 2020 2021

2022 2023 2024

Source: Cushman & Wakefield Research, PWC/Property Council (2024)

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OPERATION & FINANCIALS

DEFERRED MANAGEMENT FEE: THE SECTOR’S FINANCIAL BACKBONE The DMF remains the backbone of most Australian Retirement Living financial models. It has remained dominant because it enables flexibility: residents can access a higher standard of housing and amenity without needing to draw heavily on savings or liquidate other assets immediately. Typically, the DMF accrues annually – often at 4–6% per year, capped at a maximum of 30–35% of the original or resale price. According to the 2023 Retirement Census: • 65% of operators reach their maximum DMF within 6 years

NEW CONTRACT MODELS REFLECT EVOLVING PREFERENCES Despite the dominance of DMF, there’s growing recognition that no single model fits all retirees. In response, many operators now offer multiple contract structures, tailored to residents’ financial preferences, household types, and estate planning goals. Common alternatives include: • Prepaid Plans: Residents pay more upfront, but little or no exit fee. This model appeals to those seeking certainty or higher estate returns. • Refundable Contributions: An elevated entry price with most of it refunded at exit – often used for assisted living units or care apartments. • Pay-As-You-Go (PAYG): A rental-style model where residents pay monthly fees for services and accommodation, common for those who want flexibility or have limited capital. Regardless of contract type, most residents also pay a regular service fee. These fees are governed by state legislation and operate on a cost-recovery basis – operators are not permitted to generate profit from them.

• 89% within 8 years • Almost all by year 10 • 95% of villages set their cap at 50% or lower

VALUATION RESILIENCE AND RELATIVE AFFORDABILITY

Unlike traditional housing, retirement units are not traded on the open market – they are re-leased or resold by the operator, often under a leasehold or licence structure. This makes Retirement Living less exposed to the volatility seen in freehold housing, and more aligned to resident turnover and DMF accrual. In 2024, the average price for a two-bedroom ILU was $651,000, or approximately 59% of the median house price in the same postcode. This affordability advantage supports the sector’s underlying demand proposition, and from an investor lens, offers protection during cyclical residential market downturns.

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A MARKET OF TWO SPEEDS: TIGHTLY HELD AND EPISODIC CAPITAL MARKETS

The market presents significant opportunities for consolidation, given the current low levels of institutional ownership and this will be an increasing theme in the market. Our view is that investors should consider building optionality through smaller, bolt-on acquisitions, joint ventures, or development pipelines that position them advantageously ahead of larger liquidity events. Beyond private sector investment activity, the not-for-profit sector is also seeing a clear theme of consolidation. There has been M&A activity with not-for-profit organisations acquiring within their peer group and also from for-profit organisations. A good example is the 2024 acquisition of 13 Aveo communities from Brookfield by UnitingCare. Not for profits can be an important source of liquidity as their drivers are less cyclical and they benefit from tax concessions and exemptions, allowing them to be competitive. Scape acquired the Retirement Living platform Aveo from Brookfield earlier this year under its new brand The Living Company, with South Korea’s largest pension fund NPS co-investing. The transaction was Australia’s largest ever direct real estate deal and the inception of The Living Company, focusing on assets across all the Living sub-sectors, illustrates how institutions are increasingly approaching diversified Living strategies across the entire housing spectrum.

The capital markets landscape for Australian Retirement Living is defined by a distinctive interplay between structural fragmentation and the growing consolidation driven by institutional investors. As a result, investors may encounter extended periods of subdued transactional flow punctuated by sporadic opportunities to acquire scale through rare large portfolio divestment. This dynamic constrains the volume of transactions in a typical year and leads to episodic surges, whereby one or two large-scale portfolio transactions skew annual figures. Recent years have followed this pattern. In 2023–25, despite wider capital market caution, the sector recorded several notable deals: • The Living Company’s acquisition of Aveo from Brookfield for AUD 3.85 billion. • Brookfield’s divestment of 13 Aveo villages in South Australia to UnitingCare for AUD 122 million. • Tulich Communities’ AUD 82 million exit, comprising over 400 ILUs and aged care beds • Bolton Clarke’s acquisition of four RCA villages, demonstrating the ongoing competitiveness of not-for-profit buyers. These deals underscore a key theme: sector liquidity is selective but strategic – when assets do come to market, they tend to attract concentrated interest, often from aligned investors with existing operational exposure or long-term mandates.

CHART 8

RETIREMENT LIVING TRANSACTIONS (2015–2025)

$4,500

The Living Company / Aveo

$4,000

$3,500

Aware/Lendlease EQT/Stockland

Brookfield/Aveo

$3,000

$2,500

$2,000

$1,500

APG/Lendlease

Aware/ Lendlease

$1,000

$500

2015 2016 2017 2018 2019 2020 2021

2022 2023 2024 2025

Source: Cushman & Wakefield Research

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CHART 9

DISCOUNT RATE RANGE – RETIREMENT VS OTHER PROPERTY SECTORS

16%

14%

12%

10%

Prime Oce (Syd, Melb, Bris)

Prime Oce (Ade & Perth)

Retail - National Regionals

Retail - National Sub- Regionals

Prime Industrial

Specialised Medical Assets

Aged Care (Freehold)

PBSA (Prime) Retirement Villages

Source: Cushman & Wakefield Research

DISCOUNT RATE SPREAD Despite strong fundamentals, Retirement Living assets continue to trade at a material discount to other operational real estate sectors such as Build-to-Rent (BTR), Purpose-Built Student Accommodation (PBSA), and Aged Care. Discount rates for retirement portfolios typically sit 500–600 basis points higher than core sectors, reflecting perceived risk around liquidity, regulation, and operational complexity. However, this is gradually tightening, particularly for high-

GLOBAL SENTIMENT: AUSTRALIA AS A STRATEGIC RETIREMENT MARKET On the global stage, Australia is viewed as a mature and investable retirement market – sitting between the scale of the US and the institutional infancy of the UK and APAC peers. Global transaction volumes in Senior/Retirement Living have moderated but remained fairly resilient despite broader market caution. While the US continues to dominate activity – often with a stronger healthcare component – interest in Australia remains strong, particularly as investors see as offering opportunity for M&A/scaling strategies.

quality portfolios with: • institutional backing • geographic diversification • track record of strong cashflow performance • flexibility in contract and pricing models

The opportunity for attractive returns over the next market cycle is clear – particularly as investors search for defensive, long-hold asset classes with embedded demand and low correlation to short-term economic shocks.

CHART 10

GLOBAL RETIREMENT LIVING TRANSACTION VOLUME (2015–2025)

120

100

2015

2016

2017

2018

2019 2020 2021

2022

2023

2024 2025 YTD

Source: MSCI

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OUTLOOK & RISKS

STRUCTURAL DEMAND IS LOCKED IN; DELIVERY REMAINS THE CHALLENGE The future for Australia’s Retirement Living sector is underpinned by demographic certainty. However, the national development pipeline has contracted sharply, and near-term delivery remains well below what’s required to maintain market penetration. This shortfall supports performance in existing stock – through high occupancy and pricing resilience – but it also highlights a gap between what the market needs and what the sector can viably deliver today.

AS THE SECTOR MATURES IT WILL BRING BIFURCATION Institutional capital is accelerating platform consolidation – but investors are now seeking more than just demographic alignment; ESG integration, reporting transparency, resident satisfaction, and governance maturity are all increasingly in focus. The result is a sector in transition, with growing separation between institutional-grade platforms and legacy portfolios that may struggle to keep pace.

POLICY AND REGULATION: INCREASING PROTECTION AND TRANSPARENCY

ECONOMIC HEADWINDS ARE RE-SHAPING FEASIBILITY AND CASHFLOWS

Regulatory reform across most states has introduced clearer rules around exit entitlements, fee transparency, and resident rights. While these changes are broadly positive for the sector’s reputation, they also require operational sophistication and financial flexibility. Beyond the demographic and operational fundamentals, the sector benefits from an unusually strong policy environment. Retirement Living is one of the few real estate sectors to enjoy consistent support from both major parties, with Labor and Liberal governments alike recognising its role in alleviating pressure on Aged Care, improving social outcomes for seniors, and unlocking underutilised housing through downsizing.

High construction costs and challenging financing conditions are constraining development activity, particularly in metro areas where demand is highest but land and build costs are hardest to manage. While build cost growth remains high, most experts expect stabilisation from recent rates of increase, followed by gradual improvement over 2026-2028. On the financing front, development debt remains costly but will improve as the rate-cutting cycle continues. There is good appetite to lend to entities with strong track records in the sector. Operators are also diversifying the types of products available to consumers – offering prepaid or refundable structures to reduce volatility and appeal to a broader financial base.

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Research

Capital Markets

Josh Rose-Nokes Director, Living Research, APAC josh.rosenokes@cushwake.com

Conal Newland International Director, Head of Living, APAC conal.newland@cushwake.com

Dr Dominic Brown Head of International Research, APAC & EMEA Dominic.Brown@cushwake.com

Louise Burke Director, Living Capital Markets, ANZ louise.burke@cushwake.com

Lin Lee Senior Strategic Research Analyst, Australia lin.lee@cushwake.com

Paul Savitz Director, Living Capital Markets, ANZ Paul.Savitz@cushwake.com

Aveo Springfield Vista Retirement Living, QLD

About Cushman & Wakefield Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2024, the firm reported revenue of $9.4 billion across its core service lines of Services, Leasing Capital Markets, Valuation and other. Built around the belief that Better Never Settles, the firm receives numerous industry and business accolades for its award-winning culture. For additional information, visit www.cushmanwakefield.com.

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