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Healthy Outlook for UK Care Markets in 2023 says Report

Investors capitalise on the persistent demand for quality healthcare property underpinned by the fundamentals of the elderly care market, according to the latest UK Healthcare Market Overview 2023 from global property adviser Knight Frank.

The report presents the need for further investment in the sector as continued ageing of the UK demographic is creating significant demand for high-quality, fit for purpose beds across the continent. In 2022, approximately 10,000 new beds were granted via planning applications, this is via a mix of refurbishment and extensions to existing stock as well as new build schemes. Whilst completion of these schemes will provide a substantial addition to circa 480,000 existing bed supply, an important consideration is the type of scheme and the potential of delivery. A number of the potential new beds are by way of mixed-use schemes with the option for an on-site care setting, which may not reach build out due to social and economic factors impacting feasibility.

European Healthcare transaction volumes for 2022 closed at circa €7bn which is approximately 27% down on the year reflecting the trends across European real estate volumes which fell by 23% in 2022. Despite this the composition of capital remains consistent with previous years as cross boarder investment remained prominent. Whilst REITs accounted for circa 60% of volume, the report projects that the share of transactions attributed to REITs will contract as the year progresses and cross border capital filters through.

Julian Evans, Head of Healthcare at Knight Frank commented: “Whilst 2022 presented a number of standout factors which have continued to shape the sector, it is even more important to consider how the year ahead will play out with matters such as inflation and cost of debt playing a key part in the sectors future. Despite the clear headwinds, the underlying drivers for healthcare will support demand and performance and as in previous times of uncertainty, the sectors resilience will become increasingly apparent in the coming year.”

Whilst the nature of healthcare as a sector well supports the social impact side of ESG, sustainability and the increasing building standards with continue to be a growing consideration for investors and operators. The upgrading, refurbishment or repurposing of standing assets, for example, the older, smaller and less fit for purpose buildings may present as a viable value add strategy for operators and investors across the sector.”