Location Key as SDA’s $4bn Value Tipped to Triple

The specialist disability accommodation sector, currently worth $4 billion and expected to grow to $12 billion in a decade, is winning investors and developers. But some are getting caught out. Vacancy rates for new specialist disability accommodation (SDA) is around 9.8 per cent—that’s well above the national residential vacancy rate of 1.2 per cent. Yet, less than 10,000 new build beds have been delivered since the SDA program was launched in 2016 while there are 24,000 people who have, or are eligible for, National Disability Insurance Scheme (NDIS) funding. This is among the data revealed by the Investing in the Specialist Disability Accommodation Sector white paper prepared by specialist alternatives investment manager Barwon Investment Partners. Barwon Disability Accommodation Fund portfolio manager Joss Engebretsen says although demand is high and there’s a big pipeline of projects, developers are building in the wrong places. Engebretsen says about 60 to 80 per cent of future supply “you could just write off”. He said sites were being bought “in the middle of nowhere with no access to amenity or infrastructure” and a “really average house” built on it. “Then of course you don’t attract any participants, so the whole thing is for naught,” Engebretsen says. “We have seen a lot of that speculative development in the sector—and call that out in the white paper.” ▲ Joss Engebretsen: There has been a lot of speculative development. Engebretsen says there are many markets where SDA is undersupplied and that is what they are targeting. “Most of the feasibilities simply work or don’t work depending on whether you can actually attract residents to live there,” he says. NDIS-generated data reveals there is a nation-wide shortfall, particularly in NSW where more than 36 per cent of NDIS participants are waiting to use their SDA funding. The locations with the highest need and desirability are in NSW and Victoria, and include Gosford, Wyong, Maitland, Bankstown, Campbelltown, Penrith, Geelong, Fairfield, Brigelly, Ryde, Casey and Frankston. ▲ Data revealed that at Stirling in WA, 192 people are eligible to use SDA funding but just 21 have accomodation. In the west, Stirling, Wanneroo, Swan, Bayswater, Rockingham and Belmont are undersupplied SDA markets, while in SA Marion, Playford, Salisbury, Holdfast Bay and around Port Adelaide top the list. In Queensland, inner Ipswich and Toowoomba are the Sunshine State’s undersupplied areas, while Alice Springs, Launceston and Hobart top the list in the NT and Tasmania. These homes need a little more structural support and technology for residents but otherwise look and feel the same as any residential developments, particularly from the outside. What’s ahead Engebretsen says the sector will mature over the next couple of years with quite a lot of consolidation. “We’ve started to see a lot of semi-scaled portfolios of $20 million to $40 million come to market,” he says. “There were a lot of people coming into the sector very early wanting to build small portfolios they could then sell off to others. “Others entering the sector found it more challenging and more complex than they probably originally thought. “So, we’ve seen some of those groups [saying] let’s just finish up the project and move on to other things.” That’s where the big investors come in, including Barwon, who has a $2.2-billion healthcare real estate portfolio that encompasses SDA properties. One of its most recent projects is within Fraser Property’s MacPark development with two SDA apartments “peppered” throughout the building as well as two overnight assistance apartments for staff. Further west, Sydney-based developer Coplex has recently finished work on a $65-million project at Kala Jordan Springs on the lake. It includes 84 apartments across two four-storey buildings including 10 high-physical support, nine improved liveability and two overnight assistant units. ▲ The Coplex development is part of a broader masterplanned community for 13,000 residential centred around a 3ha lake. Coplex director Rami Ibrahim says they are looking at areas with high SDA demand when incorporating this type of home in future developments. “Unfortunately, it is rare to see developers including this type of specialist accommodation in their plans when building new facilities,” Ibrahim says. “The costs to refurbish or add customisations afterwards can be astronomical, which can limit the number of specialist disability accommodation available.” Coplex partnered with Nationwide Care Plus as the SDA provider to manage the development and ensure housing needs are met for the approved participants. The project is part of the second stage of the Lendlease masterplanned community in Western Sydney. There is clearly demand for quality and amenities, creating the opportunity to do good in the world and secure a portfolio backed by government subsidies. It can also mean higher income yields compared to traditional residential properties—but only for the right product in the right place. 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Renee McKeown
Wed 20 Nov 24

Location Key as SDA’s $4bn Value Tipped to Triple

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ExclusiveRenee McKeownWed 20 Nov 24

Location Key as SDA’s $4bn Value Tipped to Triple

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Wed 20 Nov 24