Elderly Care Industry's Boom: Real Estate Firms Seek Profit Model for a Decade
Guo Xin, who has been in charge of China Overseas Health and Wellness business for seven or eight years, believes that the industry has ushered in the "real opportunity" this year. At the beginning of this year, the General Office of the State Council issued the "Opinions on Developing the Silver Economy and Enhancing the Welfare of the Elderly," which has attracted widespread attention since the term "silver economy" emerged, and the year 2024 has been called the inaugural year of the silver economy by the industry; in July, the National Development and Reform Commission issued the "Notice on Fully Promoting the Normalization of Real Estate Investment Trust (REITs) Projects in the Field of Infrastructure," and for the first time, elderly care facilities were included in the scope of REITs project applications.
Guo Xin is currently the General Manager of China Overseas Development Health and Wellness Company. In his view, the two core management points of the health and wellness industry include asset operation and content operation. Benefiting from the introduction of the elderly care facility REITs policy, China Overseas Jin Nian Health and Wellness (a health and wellness brand under China Overseas Real Estate) is expected to further improve operational efficiency and asset value on the current operation.
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According to the China Research Center on Aging, the current scale of China's silver economy is about 7 trillion yuan, accounting for 6% of GDP. In the current development of the silver economy, real estate companies are deepening their thinking about the layout of the elderly care industry. As early as twelve years ago, Vanke and Yue Xiu Real Estate began to explore elderly care business and have cultivated "Vanke Yi Elderly Care" and "Yue Xiu Health and Wellness" business segments, respectively.
Recently, the person in charge of Vanke Yi Elderly Care said in an interview with a reporter that since its establishment in 2015, the company has laid out in core cities such as Guangzhou, Shenzhen, and Fuzhou, has opened eight health care projects, more than 2,000 beds, and has successfully realized the construction of a three-level elderly care service network of "city-community-home"; Yue Xiu Health and Wellness said that it is currently in a period of leapfrog development, the national strategic layout has初见成效, and a total of 20 projects are operated, providing 8,000 beds.
The path of initial exploration
One day at the end of August, the second phase of the Shenzhen Nanshan District Social Welfare Center (hereinafter referred to as "Nanshan Phase II") was holding a celebration event for the fifth anniversary of project operation. Different from the past, in the final award presentation, not only employees but also more elderly people with white hair came to the stage to receive awards, and they were the protagonists of this event.
Nanshan Phase II operates under a Public-Private Partnership (PPP) model. In July 2019, the Vanke Southern Regional Elderly Care Business Team (Vanke Yi Elderly Care) obtained the Nanshan Phase II project through public bidding and officially operated and managed it in August of the same year. According to Vanke Yi Elderly Care, the total area of Nanshan Phase II is 30,000 square meters, with 791 beds, and the supporting service area exceeds 7,000 square meters, with a current occupancy rate of 70%.
Vanke Yi Elderly Care said that the government-enterprise cooperation achieved in the Nanshan Phase II project is an innovative path to explore the supply-side reform of public elderly care institutions in the central urban area of Shenzhen, effectively solving the current mismatch between elderly care service supply and demand, improving the quality of elderly care supply in Nanshan District, constructing a multi-level and diversified high-quality elderly care service supply system, and providing high-quality and warm professional services for the elderly in need.
In fact, Vanke's exploration of elderly care business in Shenzhen also started with the operation of public elderly care institutions. The Rong Yue Urban Elderly Care Center in Futian District, Shenzhen (i.e., Shenzhen Futian District Welfare Center) was the first stop for Vanke to start its elderly care business in Shenzhen. In December 2016, the Shenzhen Futian District Civil Affairs Bureau signed a PPP pilot project agreement with Vanke for the Shenzhen Futian Welfare Center, which became the first public elderly care institution social reform project to be implemented in Shenzhen.Vanke's elderly care division has stated that the Shenzhen Futian District Welfare Center is located in the core business district of Shenzhen, where the supply of land for elderly care is severely insufficient. Therefore, the project carries the dual mission of constructing a composite elderly care ecosystem in the city's core area and exploring PPP (Public-Private Partnership) cooperation. Over the course of three years of initial exploration, Vanke has also laid out three and one projects in Guangzhou and Fuzhou, respectively.
During the same period, after four years of research and initial establishment, Yuexiu Property established Yuexiu Health Care in 2017 and acquired Shenzhen Yinxing Modern Elderly Service Co., Ltd. in the same year to hold and operate the Guangzhou Yinxing Yiyuan elderly care institution, with a total of 257 beds in the first phase. In the following years, Yuexiu Health Care quickly laid out nine projects, adding nearly 4,000 beds, while also launching medical services and establishing in-depth cooperative relationships with multiple elderly care medical and training institutions.
Almost in sync with Yuexiu Property, China Overseas Property took the first step in the strategic development of the health care industry in 2017—the Wuxi China Overseas Jin Nian Fangting Elderly Community project was officially established and launched, which is also the first CCRC (Continuing Care Retirement Community) project of China Overseas Property. The following year, two elderly apartment projects in Tianjin and Qingdao were established and launched by China Overseas Property, during which the company team visited Japan to study elderly care projects. In April 2019, the Qingdao China Overseas Jin Nian Fu Ju Elderly Apartment welcomed its first elderly resident, marking the official entry of China Overseas Health Care into the service operation phase.
System Construction
Real estate companies, as one of the main types of enterprises entering the elderly care industry, have gradually clarified their business layout and system through years of exploration and practice.
According to Vanke's elderly care division, as of now, Vanke's elderly care business has been laid out in four major core areas: the Southern Region, Shanghai Region, Beijing Region, and Southwest Region. It has successively opened 42 projects (mainly elderly care institutions, apartments, and medical institutions) in 13 core cities such as Hangzhou, Shanghai, Beijing, Tianjin, Guangzhou, and Shenzhen, with more than 4,200 elderly residents. Vanke has explored and deeply cultivated a sustainable elderly care service model in the Southern Region, successfully achieving the construction of a three-level elderly care service network of "city-community-home". The current product system includes city-level Le Yang Kangyi comprehensive complexes and community-embedded elderly care service centers.
In the city-level Le Yang Kangyi comprehensive complex, Rong Yue · Bin Jiang Zhong is the second "city-level medical and elderly care composite full-care elderly care institution" that Vanke has laid out in the Southern Region in Guangzhou. It was transformed from the original Pearl River Navigation Building and officially operated in March 2019. The project has a construction area of 5,000 square meters and a total of 156 beds, with a current occupancy rate of 95%. It is worth mentioning that while providing services to residents, the project also radiates from the institution to the community and home, providing services such as meal assistance, home visits, daytime custody, respite care, and barrier-free transformation for more than 10 nearby mature communities.
Yuexiu Health Care has also chosen to deeply cultivate several specific regional markets. Currently, Yuexiu Health Care has laid out in the Guangdong-Hong Kong-Macao Greater Bay Area, Yangtze River Delta, and Chengdu-Chongqing Economic Circle, operating a total of 20 projects nationwide with nearly 8,000 beds. Yuexiu Health Care has stated that this differentiated market layout strategy has laid a solid foundation for its rapid expansion nationwide.
At present, Yuexiu Health Care's business system is mainly composed of the elderly care sector, medical sector, and related industry chain. The elderly care sector includes health care communities, elderly care institutions, medical institutions, and home-based elderly care services; the medical sector includes rehabilitation hospitals, nursing homes, etc.
Taking Yue Lu Ju as an example, Yuexiu Health Care provides a full range of solutions for the elderly from preparing for retirement to entering实质性 retirement, according to different physical condition stages and different life characteristics, providing continuous care for three stages of health leisure, health care, and assistance and care. Yuexiu Health Care has stated that Yue Lu Ju adopts a membership system, quickly recycling funds through the sale of "active apartments". "The mode of providing medical services, elderly care services, and value-added services to customers through self-owned elderly care apartments and nursing homes to bring operational income, achieving a dual virtuous cycle of funds and services."In the early stages, by learning from the experiences of Japan and the United States to establish a basic system, China Overseas Jinian Health Care ultimately positioned its brand as the "Creator of New Chinese-style Elderly Living" and established a "Jinian 101 Elderly Care System". Relying on China Overseas Real Estate's layout in more than 60 central cities across the country and 450 high-end institutional resources, it has developed elderly care services. Currently, China Overseas Jinian Health Care's product types include CCRC, institutional day care centers (CC), urban quality elderly apartments (CB), and home-based elderly service platforms (HC), covering both home-based and institutional elderly care services. At present, China Overseas Jinian Health Care has four operating projects nationwide and one under construction.
"The Waves on the Other Shore"
After years of development, real estate companies' layout in the elderly care business has also entered the next stage.
Wanyi Elderly Care told reporters that since 2022, it has been in the "Innovation Road" period of Wanyi Elderly Care, exploring new types of elderly living styles, deeply cultivating large community elderly service platforms, involving travel residence "light elderly care", community health management centers, large-scale comprehensive residential area three-dimensional elderly service solutions, and the elderly service model in the Greater Bay Area. Yuexiu Health Care stated that 2021-2024 is its leap period, with all projects fully opened and operated, and five major self-operated projects. In the next ten years, Yuexiu Health Care is committed to building a strong core operation and asset management capability, creating a leading health care industry brand nationwide.
It is worth noting that the initial layout of real estate companies in the elderly care industry is related to the transformation of the real estate industry. However, due to the characteristics of large capital investment, long recovery cycle, and the need for continuous operation in the elderly care industry, the profit model of real estate companies in this industry is still unclear. Vanke's management once compared the elderly care business to Vanke's "other shore" - you can see the surging waves of the river, and you can also see the broad world on the other shore.
Regarding the "surging waves of the river", Yuexiu Health Care told reporters that looking at the entire elderly care field, there are still three major industrial bottlenecks, which are obstacles to capital entry, lack of mature profit models, and lack of professional talents. Among them, the profit model issue is a major factor that has long troubled elderly care companies.
Guo Xin believes that the elderly care facility REITs policy introduced this year actually gives elderly care assets a way out, because it touches on the key issue of profit models and provides an asset exit path. "With the elderly care industry being characterized by the central government as a new support point for the economy, the health care industry will usher in a period of rapid development."
China Overseas Jinian Health Care revealed that by setting up an investment map, building a product system, constructing an industrial supply chain, building an operation cockpit system, improving the customer care system, implementing the 101 operation system and asset exit path, it has formed a comprehensive asset operation and management chain. Currently, it is cooperating with leading companies in the industry to explore the technological transformation path from informatization to digital intelligence and then to humanoid robot intelligence, aiming to improve management efficiency and service quality, and create a new consumer market in the health care field.