Recently, Wharton Business School’s China e-newsletter turned its attention to China’s senior care industry. The article is a good overview of what has been going on in the market, with particular attention paid to some of the early entrants and what can be gleaned from their nascent endeavors.
The article does a good job of briefly outlining the commercial opportunity. As the Wharton newsletter points out:
By the end of 2010, China had only 3.5 million beds, in 101,000 public senior care facilities — enough to provide for less than 2% of its elderly. “The Chinese government realizes that it is going to be difficult and challenging to care for all seniors,” said Bill Pettit, president of Merrill Gardens, a Seattle-based senior care company that is preparing to set up a senior care advisory, consulting and management company in Shanghai.
Overwhelmed, the government is welcoming foreign and private investors to provide other options for senior care. Michael Qu, a lawyer at the Shanghai Co-Effort Law Firm, estimates that the senior care market may grow to RMB 1.8 trillion by 2020 and RMB 7.6 trillion by 2050, from the current estimated RMB 1 trillion. “China is a big senior care market with huge potential,” says Qu, who specializes in senior care and real estate and publishes the China Senior Care Housing newsletter.
However, the need for a model that is proven, profitable and scalable remains (something we have touched on here, here, here and here). They share:
Many foreign companies, senior care housing operators, real estate firms and major U.S. fund management companies are gearing up to enter the China market, hoping to capitalize on the country’s growing affluence. Past experience suggests, however, that the road ahead will be a bumpy one. So far, China has no viable model for senior care housing. It lacks any senior care professionals, including doctors specializing in geriatrics. Moreover, a strong tradition of caring for elderly relatives at home also mean there is little experience with providing anything but the most rudimentary hospitals and institutions for those who are unable to care for themselves.
The difficulties at General’s Garden, which we’ve discussed previously, also factor into Wharton’s view of the market opportunity. They write,
Another recent example, Beijing’s General’s Garden, or Jianghu Zhuangyuan in Chinese, also appears to be struggling. The project is more of a residential complex than assisted care housing, with a golf course, recreational facilities a country club, hospital and clinic. The elder care facilities include four buildings with 70 rooms each, ranging in size from 34 square meters for RMB 5,000 a month to 52 square meters for RMB 7,700 per month. So-called “transgeneration” units, of over 150 square meters to 166 square meters, require the purchase of a RMB 3 million, 50-year membership. Total investment is estimated at over US$100 million, though the company declined to provide details.
The entire project is in the process of being recapitalized, after laying off its senior staff in February, said a senior care industry consultant who declined to be named.
The overall message Wharton sets out is that the industry has a real and compelling opportunity, but that time, discipline and patience are going to be necessary for it to successfully evolve. The entire article is worth reading and can be read here.
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