Overall, investor appetite for UK Alternatives remains incredibly high, with the care sector proving to be increasingly attractive to investors. Factors such as the growing need for elderly care services with an aging population and its relative immunity from macro-economic factors, coupled with challenges in other assets classes such as high street retail, are driving interest according to the latest report on Alternative Investments in the UK by specialist business property adviser, Christie & Co.
The report, UK Alternatives Investment Index: H1 2019, provides an overview of current yield trends on prime and secondary investments across various subsectors. The report finds that the average yield on prime investments across UK alternatives, as a whole, ranged from 3.5% to 7.5%, with the care sector demonstrating yields of 3.5% to 5% for super-prime/prime and 5% to 7.5% for secondary investments.
Christie & Co’s report highlights that the strongest yields are attributed to high demand, particularly from institutional investors, for a limited supply of super-prime assets in the market, which is driving record yield compression of below 4%. Prime and secondary assets are also very attractive, Christie & Co notes, with considerable activity in these markets with increasing demand for new builds and a wider range of operators taking leases.
A key incentive for investors to take on leases is the inclusion of step-in rights agreements and full visibility of trading information to mitigate risk, which Christie & Co has seen with a recent uptick in demand for performance monitoring services.
As a needs-based sector which only looks to grow, with an increasing base of service users and a population with an increasing range of health conditions, Christie & Co finds that elderly care will continue to be attractive to investors and experience strong yields.
Michael Hodges, Managing Director – Care Consultancy at Christie & Co comments, “The elderly care market presents an excellent opportunity for investors and, over the course of the last 18 months, we have seen a notable increase in activity and interest from a wide variety of funds, attracted by the strong demand drivers which underpin the sector.”