Japan is going through drastic demographic shifts as the population ages and birth-rates shrink. Researchers and publishers are focusing on the long-lasting effect of such a shift on the economy and social structures, emphasizing the upcoming hurdles involving tax hike and pension payouts.
Yet, issues that come along with the change in demographics also bring opportunities with them. Namely, Japan will soon require a lot of premises of all types to accommodate the aging population and provide the necessary care. Thus, there are plenty of investment opportunities in the senior housing and care facilities sector. Let us take a closer look at them.
More elderly, fewer care providers
Senior care in Japan is changing along with the changes in family structure. It is more common now to have a nuclear family (parents and children) than an extended one (several generations living under the same roof). There are several reasons for that.
Firstly, sustaining big houses is difficult and pricey, especially in urban areas where land prices keep on going up. For younger generations, it is often not an option to stay in the larger houses in the rural areas with their parents and grandparents as they migrate to bigger cities for study and work opportunities. Housing in the city centers is mainly meant for students and company workers who often live alone.
There is a shortage of healthcare facilities and care providers for senior generations in Japan.
Secondly, the labor market is changing. To cover up for workforce shortage Japan is trying to increase the number of foreigners laborers and working women as a part of Prime Minister’s Abe economic development plan. However, for women, who have traditionally been the primary caregivers not only for children but for the elderly as well, it is difficult to handle both areas. As men are still not keen on taking paternal leaves, or even yearly vocations, women can channel their efforts in only one of the directions. Thus, the number of caregivers available at home is decreasing.
Healthcare real estate in Japan
In the 2000s the market for healthcare facilities started to grow welcoming Fudosan’s Hospitality Residence Fund and Singapore’s Parkway Life REIT as one of the first. When the financial crisis stroke, many smaller players were discouraged to invest in this type of real estate or to expand their presence.
In 2013, when healthcare real estate became more regulated, three other actors entered the market: Nippon Healthcare REIT (“NHI”), Healthcare & Medical Investment Corporation (“HCM”), and Japan Senior Living (“JSL”). Nevertheless, the majority of providers are small while there are not enough assets of appropriate quality setting limits to institutional investments.
Types of healthcare housing in demand in the private sector
Still, Japan will have to face the reality of providing healthcare housing and facilities. The key directions that will need support is arranging physical spaces where people can live as well as arranging appropriate care depending on one’s physical and mental state when entering the facilities.
Based on these requirements Japan has currently the following types of accommodation for seniors in the private sector as presented in the report by Savills World Research:
1) Fee-based senior housing with nursing care ( 介護付有料老人ホーム, Kaigo-tsuki Yuuryou Roujin Hoomu) for long-term care with permanent in-house employees.
2) Residential-type fee-based senior housing (住宅型有料老人ホーム, Juutaku-gata Yuuryou Roujin Hoomu) for long-term care delivered by outside service providers.
3) Health-type fee-based senior housing (健康型有料老人ホーム, Kenkou-gataYuuryou Roujin Hoomu) for those who generally can live independently, focusing on provision of recreational activities.
4) Senior housing with support services (サービス付き高齢者向け 住宅（サ高住), Saabisu-tsuki Koureisha-muke Juutaku (sakousei)) providing a disability-friendly environment with safety checks and consultation services as the bottom line, while other services are generally outsourced.
5) Group home (グループホーム, Guruupu Hoomu) for shared living for patients with dementia.
What is next?
The Savills report suggests that “generational business transfers, operator consolidation, and the need for capital expenditures to meet changes in healthcare demand will encourage disposition of real estate, potentially leading to a wave of new investment opportunities”.
So far, Japan is the only super-aged nation in the Asia-Pacific region. It means that sooner or later other countries will face the same issues, and those investors who managed to compile an appealing portfolio in Japan will find even more opportunities in other countries as well.
"Otsumami" - a bite size snack:
Compiling a comprehensive investment portfolio in healthcare real estate in Japan may become the key to other markets with the aging population.
