Investment activity in UK healthcare real estate continued to grow strongly in the first part of 2018 following a record-breaking 2017, according to the latest figures from CBRE.
The numbers show that by the end of May, investment volumes had hit £687m – significantly higher than the £492m invested in the same period last year and the £400m reported in 2016.
“Real estate investors generally feel pretty positive about the world and those focused on alternative asset classes, like healthcare, feel positively optimistic,” says Tom Morgan, executive director of CBRE healthcare.
“The underlying dynamics of the health and care sectors remain strong with occupational and investment demand for good stock significantly exceeding supply.”
Notable transactions in the first quarter of 2018 include Triple Point Social Housing REIT’s acquisition of 190 units in three combined transactions for more than £40m and Impact Healthcare REIT’s sale-and-leaseback deal on three purpose-built care homes operated by Prestige Care Group for £17m.
Healthcare is becoming an increasingly popular sector for investors. Results from CBRE’s recent EMEA-wide Investor Survey show that healthcare is one of the most popular subsectors of the alternatives market and that large numbers of investors are looking to get into the sector.
It is anticipated that investment volumes in healthcare real estate will continue to grow thanks to strong investor demand for this sort of long-dated, fixed-income stock.
“The scene is set for a fascinating 2018,” says Morgan. “Quantifiable operational risk is considered a legitimate route to rental growth and premium pricing, shopping centres and secondary offices are now alternative, flexible multi-use operational assets, whereas healthcare and housing with care is ‘core-alternative’.”
CBRE highlights the potential of London’s healthcare market in particular, describing the current supply of elderly care properties in central London as “undeniably sparse”. With only 3,178 elderly care beds and 20,357 retirement housing properties, it estimates that supply would satisfy less than 10% of total current demand.