Resilient health and social care attracts investors

Healthcare assets are attracting greater levels of capital from investors as demand has remained resilient during the pandemic, a survey has found.

Commercial real estate services and investment firm CBRE surveyed 120 investors, developers, operators and lenders, with a combined investment of nearly £24bn. Nine out of ten investors (92%) maintained or increased allocation to healthcare.

Specialist healthcare REITs, private equity funds and institutional investors responded to CBRE’s UK healthcare market sentiment survey.

Figures showed more than 40% of respondents have invested over £500m into healthcare property.

Elderly care, retirement living and specialist care top the list of areas seeing the most interest, where demand is underpinned by the UK’s ageing population. Respondents also predicted these sub-sectors will experience the greatest investor demand.

However, while only 17% said they were targeting NHS lead facilities, 38% predicted significant demand in this sector. The survey said the appeal is largely due to the typically stable income profile of these facilities.

Uncertainty surrounding Covid-19 has resulted in varying levels of caution amongst healthcare investors, with 39% now focusing on investments considered to be lower risk.

Those who would have previously invested in assets with shorter leases, will now only consider terms of at least ten years.

Real estate investors looking to inject capital have shifted focus, with 30%-40% of respondents targeting care homes that were built more recently and with wet-room provision. This attention to quality also applies to the operation and management of an asset.

The survey also found there is a higher sense of security amongst lenders when dealing with healthcare asset classes, with 72% of respondents interested in increasing their level of exposure.

The lenders responding to the survey have loan books of approximately £7.8bn in the healthcare sector.

Overall, 80% asaid they are willing to lend to the elderly care and retirement living sectors.

‘At a time of wider-market uncertainty, the sector’s needs-based demand characteristics, underpinned by a compelling demographic story in the UK, have grown in appeal as evidenced by the acquisition of Priory Group for over £1bn at the end of 2020 in which CBRE advised Medical Properties Trust, the funding partner to Waterland Private Equity,’ said Tom Morgan, head of healthcare at CBRE.

‘The resilience of the UK health and social care sectors has really shone through in this survey of the leading participants in the UK healthcare market. Despite the ongoing challenges, it is impossible not to be hugely optimistic about the strength of this sector and the opportunities for high-quality operators and high-quality real estate investment.’