The fee reform unlocking investment in retirement living

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

Transaction volumes in 2025 reached AU$5.33 billion, more than tripling the 2022 peak of $1.72 bn, according to JLL research.

It was the $3.85 bn acquisition of Aveo, one of the sector's largest operators, by purpose-built student accommodation specialist Scape in 2025 that saw investor confidence reach a new high. The deal, Australia's largest direct real estate transaction, signalled a fundamental shift in how institutional capital views the sector.

One key factor thought to be helping deals along is a shift away from a one-size-fits-all fee structure which has seen residents historically pay a 'deferred management fee' of around 33% of their upfront purchase payment at the time of exiting the property. The move to higher upfront fees is dismantling a substantial barrier to investment for institutional capital. 

"This new fee structure has addressed the issue of lumpy cash flows and uncertain exit timing," says Alex Wheeler, head of Alternatives, Value and Risk Advisory, JLL. "Operators can now generate 7-8% returns on upfront capital while funding capital expenditure programmes.”

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

Currently, around 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.

The 2025 PwC-RLC Retirement Census indicates that retirement village occupancy stands at approximately 94% in Australia, with almost 27,000 waitlist registrations recorded by 31 December 2025. 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 is a large reason for 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 and lifestyle amenities and access to care.

"This change in attitude is enabling operators to create sophisticated vertical developments in premium urban locations where residents are close to healthcare, cultural amenities and family connections," Wheeler says.

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+ 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+ 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 – a stark contrast to younger demographics exploring rental housing alternatives.

It is this financial sophistication of baby boomers and expectations for quality that have motivated operators to evolve their fee structures. The traditional deferred management fee model created unpredictable cash flows for operators as revenue timing depended on resident departures, which are difficult to forecast across smaller portfolios.

Leading operators have introduced alternative contract structures that provide more immediate fee income. These include options for residents to pay higher upfront fees –typically around 10% of the purchase price – in exchange for simpler, more predictable financial outcomes.

Importantly, this additional upfront capital has enabled operators to significantly enhance their village offerings. Aveo, for example, has reinvested in approximately 50% of its portfolio, renovating or redeveloping community buildings, the social heart of retirement villages 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.”

The Aveo acquisition, backed by Korean pension fund NPS, demonstrated the global investment appetite for Australian retirement living assets. But 2025 also saw the $845 million acquisition of RetireAustralia by US investment manager Invesco.

“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 the Australian Retirement Trust which has taken control of Keyton Retirement Trust with its $525 million, additional 25.1% stake. Australian Retirement Trust now owns 75% of Keyton, effectively having full control.

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

Enhanced income certainty is also supporting scale-seeking institutions as they address the sector's major supply shortage. Large portfolios help smooth the revenue variability while also enabling operational efficiencies. Some of the largest sales have also seen the largest number of units across a variety of geographically diverse assets. Aveo, for example, has almost 10,700 units across 70 assets, while Keyton Retirement Trust had around 11,500 units across 66 assets. In many cases the assets also have additional development capacity, further enhancing the future value of the portfolios.

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.