Having discussed sectors such as later living, logistics and hotels and leisure in recent articles, it is timely now to shine a light on healthcare.
This is a further part of the real estate development and investment market which has seen increased interest, and in which CBRE has researched in detail through our recently-produced UK Healthcare Sentiment Survey, which examines investment interest and activity, as well as getting the views of developers and healthcare providers.
The healthcare sector is divided into a number of specialisms, including supported living, elderly care homes and senior living provision together with more specialist care homes for dementia patients and brain injury patients, private acute hospitals, mental health hospitals, primary care practices and National Health Service-leased facilities.
Given the ageing population in Northern Ireland, it’s not surprising that healthcare investors are targeting age-related healthcare assets such as elderly care homes and senior living but also with a particular focus on dementia care across specialist homes. Investors are particularly looking for real estate where it can be a catalyst for operational improvement in care home businesses.
Recent movement in the Northern Ireland market includes the potential sale of the Kingsbridge Healthcare facility to a private equity firm, the rapid growth of the Healthcare Ireland Group supported by investment “sale and leaseback” arrangements supported by the Welltower Group, a USA investor in healthcare, as well as the latest being the opening of an 80-bedroom facility in Newtownards by Dunluce Healthcare.
Other groups that continue to extend and specialise further in dementia care and brain injury care include the Macklin family and the Easteden Group in Co Derry.
The key takeaways from the CBRE survey are that investment focus has pivoted from income-driven strategies to opportunistic and value add opportunities. Investors are, as always, drawn to attractive, reliable returns, the strong fee rises which have happened throughout the sector and obviously strengthening those returns, coupled with high occupancy rates across the board.
Regarding development in the sector, land availability, long planning time scales and cost inflation have all, however, had a negative effect. Developers in the survey, going forward, now believe the key catalysts for a return to development activity are improved debt availability and an adjustment in site pricing, enabling previously marginal developments to now commence.
In terms of operators in the market there are concerns around an ageing population that has increasingly complex care needs, but there is more positive news in the finding that 78% of care providers plan to maintain or grow their portfolios over the next five years. Despite inflation and staff challenges, 50% of provider respondents are optimistic that fee increases over the next years will be enough to maintain profitability and attract a workforce.
As in every property sector, environmental, social and governance (ESG) credentials have advanced from being a niche add-on to something that investors, developers and providers now strongly require. ESG initiatives will continue to be a focus as energy-efficient buildings help to reduce operational costs, with a further driver being that the healthcare sector attracts investors hoping to make a positive social impact.
With the health service in Northern Ireland under severe pressure, it is not unusual that developers, investors and operational entities are looking for growth and renewed strategies to profit from this sector.
CBRE NI is heavily involved in advising in this sector and anticipate that further new entrants to the health real estate market in Northern Ireland are imminent.
- Brian Lavery is managing director at CBRE NI
