The fee reform unlocking institutional cash in retirement living

Australia's retirement living sector is attracting unprecedented investment, with 2025 sales reflecting structural changes that have addressed long-standing barriers to institutional capital.

Transaction volumes reached $5.33 billion, more than tripling the 2022 peak of $1.72 billion, according to JLL research.

The headline $3.85 billion acquisition of Aveo, one of the sector's largest operators, by purpose-built student accommodation specialist Scape (now positioned under The Living Company) saw investor confidence reach a new high. As Australia's largest direct real estate transaction, it signalled a fundamental shift in how institutional capital views the sector.

Later in 2025, Invesco's $850 million purchase of Retire Australia further reinforced this progressive change in sentiment for seniors living.

A key factor helping deals materialise is a shift away from an historical one-size-fits-all fee structure – the deferred management fee (DMF) – towards flexible options that give both residents and operators greater control of their financial interests.

Historically, the DMF model created unpredictable cash flows for operators as revenue timing depended on resident departures, which are difficult to forecast across smaller portfolios. Structured on tenure, time and a percentage of a resident's ingoing contribution, the DMF meant operators often waited years to realise returns.

"It used to be the case that higher yielding returns wouldn't be realised until a village's maturity, some 15 to 20 years after original construction," says Alex Wheeler, head of Alternatives, Value and Risk Advisory, JLL.

The shift puts more money in retirees' pockets in the long term while allowing operators to reallocate capital more efficiently and generate more annuity-based revenues. Newly established contracts offering upfront payment options have proven just as popular as legacy DMF arrangements. The change has broken down barriers for traditional core capital.

"New contracts have allowed investors to capture returns through the whole asset lifecycle, from development to physical obsolescence," Wheeler says.

This additional upfront capital has enabled operators to significantly enhance their village offerings. Aveo, for example, has reinvested approximately $50 million on upgrades across its portfolio over the past three years, focusing on renovating or redeveloping community buildings where residents gather, socialise and build connections.

"These investments in shared spaces and amenities directly improve residents' lifestyle experience, mental health and sense of community," Wheeler says. "The result is a virtuous cycle where improved financial predictability attracts institutional investment, operators reinvest capital in better amenities, enhanced lifestyle offerings drive demand, and villages maintain high occupancy and pricing power."

An ageing population is clashing with constrained supply to create strong, long-term investment demand. The fact it is driven by demography rather than economic cycles makes it a compelling case for institutional investors.

Currently, 5-6% of Australians aged 65 and over live in retirement villages, according to JLL. By 2046, while that penetration rate may remain similar, the underlying population will have grown dramatically. The number of Australians aged 65 and over is projected to increase from 5.1 million in 2026 to 7.4 million by 2046 – a 46% increase, representing 22% of the total population, Australian Bureau of Statistics data shows.

Retirement village occupancy stands at approximately 94%, with almost 27,000 waitlist registrations recorded by 31 December 2025, according to the 2025 PwC-RLC Retirement Census. Compared with the 2025 outlook, the number of retirement village units forecast to be delivered in 2026 and 2027 has fallen by almost 30%.

Changing perceptions are driving much of this demand. The sector is shedding its stigma as a 'last resort', with residents increasingly viewing retirement villages as a lifestyle upgrade. The expectation now is for social connectivity, security, lifestyle amenities and access to care.

"Operators are now creating sophisticated vertical developments in premium urban locations with amenities that rival build-to-rent facilities. These include wellness rooms, golf simulators, indoor pools and wine cellars, all close to healthcare, cultural venues and family connections," Wheeler says.

Examples are Hyegrove in Willoughby, Sydney, boasting a beauty salon, cinema, wine room, sauna and steam room. At Watermark Freshwater, part of the Harbord Diggers club, also in Sydney, a residents have access to wine cellar, terrace and woodfire oven.

The inherent wealth of the Baby Boomer generation is further enabling premium development. Unlike previous generations reliant on government pensions, they are entering retirement with significant superannuation balances, property equity and higher lifetime earnings.

The average household net worth of the 65-plus age group is $1.5 million, with more than half of this equity tied up in property assets and 20% in superannuation, based on the ABS Household Income and Wealth Survey 2019-20.

Critically, 85.2% of the 65-plus population are homeowners – 73.1% own their homes outright, 9.1% own with a mortgage.

This financial position makes transitioning to retirement villages a viable lifestyle choice rather than a financial strain. It’s a stark contrast to younger demographics exploring rental housing alternatives.

The Aveo acquisition, backed by Korean pension fund NPS, and acquisition of RetireAustralia by US investment manager Invesco demonstrated global investment appetite for Australian retirement living assets.

"The sector is now attracting a broader range of institutional investors, from offshore capital seeking exposure to Australia's demographic trends to domestic superannuation funds diversifying their portfolios," says Vivienne Bolla, director, Research, JLL.

This includes Aware Super, which has taken control of Keyton Retirement Trust with its $525 million acquisition of an additional 25.1% stake. Aware Super now owns 75% of Keyton.

Not all transactions have achieved premium pricing. Some portfolio sales have settled at discounts to book value, reflecting factors such as asset quality, location mix and market timing.

"Regardless, the consistent theme across all deals is increased transaction velocity and broader investor participation," says Will Silk, research manager, JLL. "This signals a maturing asset class moving from niche alternative to mainstream institutional investment."

Enhanced income certainty is supporting scale-seeking institutions as they address the sector's major supply shortage. And scale is attracting capital from offshore investors as well as pension and sovereign wealth funds, diversifying ownership from what has historically been domestic or not-for-profit operators.

Some of the largest sales have involved the largest number of units across geographically diverse assets. Aveo, for example, has almost 10,700 units across 70 assets, while Keyton Retirement Trust has around 11,500 units across 66 assets. In many cases, assets also have additional development capacity, which can be lucrative, particularly for brownfield sites where word of mouth and existing facilities drive sales.

Recent transaction activity points to an asset class transforming into a mainstream institutional holding. "As operators continue to enhance village quality and deliver measurable lifestyle outcomes for residents, the investment case strengthens further, supported by Australia's demographic tailwinds and residents' focus on community, wellbeing and quality of life," Wheeler says.