Private capital is stepping into a gap in Australia’s healthcare property market, filling a funding shortfall where federal government commitments to pay for care exceed its ability to provide the buildings. Sandro Peluso, the firm’s national director for Healthcare & Social Infrastructure, explained that private investors are being asked to cover the difference.
While the need for aged care and social infrastructure is growing, capital is not rushing in. Mr Peluso described investment as deep but highly selective. He noted that investors are looking past the lease itself to the quality of the operator, local demographics, and the long-term sustainability of the asset. This means not every property with a healthcare tenant is viewed as an attractive investment. Marcello Caspani-Muto, another CBRE director, added that demand is uneven within individual markets. He pointed to childcare as an example, where some areas can have more centres than others despite lower demand.
Aging Population Fuels Health Spending
The federal government’s 2026 Intergenerational Report highlights the scale of the demographic shift. David Koch, a business and finance commentator, delivered the keynote address. He said demographics are about as close to a sure thing as economics gets. Mr Koch cited the report’s projections that the number of Australians aged 85 and over will triple by 2065-66. The report also forecasts federal health spending will rise from 4 per cent of GDP in 2025-26 to 6.2 per cent by 2065-66, while aged-care spending is projected to increase from 1.5 per cent to 2.3 per cent of GDP.
Mr Koch noted that Australia will have 39.3 million people by 2065-66, but deaths are expected to outnumber births from the 2060s as fertility declines. He said the only question is whether the beds, carers, and money will be there when they are needed. Mr Peluso said the federal government research cited by Mr Koch indicates Australia needs to open a new aged-care facility every three days for the next 20 years. This amounts to about 10,500 additional beds a year.
Private Partnerships and Location
For property investors, this demand does not guarantee returns. Priscilla Radice, chief executive of the Victorian Health Building Authority, outlined the state’s hospital project pipeline. Tom Patrick of Barwon Investment Partners suggested there is scope for private-sector partnerships involving smaller healthcare properties rather than concentrating investment around major hospitals. He pointed out that doctors and specialists often want to work close to established employment and residential centres, making location a critical factor.
Property requirements vary between aged care and retirement living. Georgia Willis, chief executive of Regis, said aged care facilities must be designed around how older Australians live and receive care, rather than simply providing accommodation. She noted that residential aged care is designed for residents requiring higher levels of support, while retirement living generally targets more independent residents. Mr Peluso said investors are increasingly assessing healthcare and social infrastructure through both property and operating lenses. The strongest assets are being judged on their property fundamentals and the sustainability of the service and operator.
Demand Beyond Aged Care
The investment need extends beyond aged care. Mr Peluso noted that Australia’s healthcare and social assistance sector already employs about 2.4 million people, or 16 per cent of the workforce. The Intergenerational Report also forecasts health and aged-care demand will rise as Australians live longer, with ageing accounting for about one-third of the projected increase in health spending over the next 40 years. Mr Peluso said the question for property owners is increasingly whether an asset has a healthcare tenant and whether the operator, location, demographics, and building remain viable over the life of the investment.
