South Korea, grappling with a fast-aging population, has relaxed development and ownership rules for senior housing, opening the sector to foreign healthcare real estate investment trusts (REITs) and fueling new waves of investment.
In late May, amendments to Korea’s Welfare of the Senior Citizens Act took effect, allowing a broader range of entities, including REITs, to develop and operate senior living facilities in the country.
Fewer than 40 companies qualified under the previous rules – not enough given the surging demand for elderly housing in what is now a super-aged society.
The reform now allows anyone with operational control of land and buildings to develop senior living communities, even without ownership – a change that enables investment vehicles, like REITs, to enter the market.
This is a welcome shift for Korea’s senior living community development, which requires long-term, stable investment, said an industry observer.
REITs are expected to take a larger role amid a prolonged slowdown in Korea’s real estate project financing, a result of broader economic headwinds, market analysts said.
SENIOR HOUSING, A GROWTH MARKET
Senior living is widely viewed as a growth market as the global population is aging fast.
Rendering image of VL Lewest, a luxury senior living community under development by Lotte Hotels & Resorts in Seoul, South Korea (Courtesy of Lotte Hotels &Resorts) With elder welfare becoming a pressing issue, the country’s legal reform permitting REIT involvement in senior housing is seen as a positive signal for investors and developers.
Healthcare REITs own, operate, manage, acquire and develop healthcare-related real estate, including senior living communities, hospitals, medical offices, outpatient facilities and nursing facilities.
The sector has been playing a main role in providing senior living facilities in developed markets, like the US, where healthcare REITs account for 8% of the country’s total stock market cap, valued at roughly 125 trillion won ($91.3 billion).
The US healthcare real estate market is also projected to grow to $1.87 trillion in 2030 from $1.32 trillion in 2024, according to ResearchAndMarkets.com.
In contrast, Korea’s healthcare REIT market is in its infancy.
In 2023, the Ministry of Land, Infrastructure and Transport launched the country’s first-ever healthcare REIT, mainly investing in senior living communities.
The REIT, operated by Korean real estate asset management firm MDM Asset Management, plans to open a senior living town on a land 186,487 square meters in Dongtan, Gyeonggi Province, by 2032.
If successful, the country’s senior housing market could attract more capital from other REITs, nursing homes, hotels and insurance companies, said industry observers.
“REITS are expected to become the main capital source for the domestic senior town market, replacing traditional project financing,” said an unnamed official from the Korean real estate development industry.
Apartment buildings in Seoul FOREIGN PLAYERS MOVE IN
Encouraged by the rosy outlook, some foreign healthcare REITs have already entered Korea to seize early opportunities.
Ventas Inc., a leading healthcare REIT operator offering facilities for the elderly in North America, has recently opened a Korean operation, raising expectations that other foreign healthcare REITs would follow suit.
Manhattan-based Warburg Pincus LLC, with $87 billion in assets under management, has also advanced into the Korean senior housing market in partnership with SK D&D Co., a real estate development unit of Seoul-based conglomerate SK Group.
These foreign healthcare REITs pay special attention to senior living community development in the greater Seoul area.
The Warburg-SK team’s first project is also the development of a 12-story high-end assisted living facility for senior citizens in Bangbae-dong, Seocho-gu, within Seoul’s core Gangnam residential district.
Construction is scheduled to kick off in early 2026, with completion targeted for 2028, the US private equity firm announced in early March.
“Foreign investors have been keeping a close eye on Korea’s shortfall of senior housing,” said an official in the local real estate industry.
“We expect continued foreign capital inflows into senior housing offerings, particularly through partnerships with local developers in the Seoul metropolitan area.”
Write to Oh-Sang Yoo at osyoo@hankyung.com Sookyung Seo edited this article.
