Investors Flock to UK Healthcare Property Market as Sector Transitions to Growth
The UK healthcare sector seems to have entered a period of active growth following a multi-year post-pandemic recovery, according to leading global property adviser Knight Frank, with a record year for healthcare property transactions in 2025 reflecting investors’ confidence in the outlook for the market.
Knight Frank’s 14th annual Healthcare Trading Performance Survey, whose respondents account for over 100,000 care beds across 781 UK towns and cities, reveals that UK healthcare operators have delivered growth in EBITDARM margins to an average 30.1% in 2025, up 4 percentage points from the prior year. 18% of care homes achieved EBITDARM margins in excess of 40%, up from 13% in 2024, and the proportion of homes categorised as loss-making fell year-on-year from 5% to 3%.
This robust improvement in profitability was driven in large part by a sector-wide uptick in weekly fee income. Average fees across UK care homes grew by 9.8% to £1,298 per week in the past year, with weekly fees for personal care experiencing the most profound growth at 12%. Occupancy, too, has experienced a notably bounce-back from the pandemic period, with nationwide care home occupancy reaching 88.7% in 2025 versus 88.3% in 2024.
Investors capitalising on growth:
The year-on-year improvement in key UK care home performance metrics reflects the sector’s entry into a stage of active growth, following a multi-year period of recovery from the impacts of the pandemic. This has been reflected in record transactional activity in the UK healthcare property market this year, with global investors increasing their exposure to UK care homes to capitalise on the sector’s strong performance, as well as the defensive characteristics it demonstrated throughout recent years.
Knight Frank recently forecast that c. £12 billion of UK healthcare property transactions are forecast to complete in 2025, more than treble the long-term yearly average. As at the end of Q3, £8.6 billion of UK healthcare property deals had transacted this year, £6 billion of which were completed by Knight Frank, with Primary Health Properties’ £1.8 billion bid for Assura PLC marking the standout deal due to close in the final quarter of the year.
Headwinds remain:
While profitability gains have been noted across the UK healthcare sector in 2025, the prospects for future growth remain challenged by rising cost pressures, exacerbated by the latest Budget announcement. Staffing costs per resident have increased 7% year-on-year to £37,877 as wages rise faster than RPI inflation, while property costs per bed have increased to an average of £4,427, up 18% on 2024.
Ryan Richards, Associate at Knight Frank, commented: “Having remained resilient to macroeconomic turbulence in the period immediately following the pandemic, key performance metrics for the UK healthcare sector indicate that the market is now transitioning into a period of growth. As well as validating the conviction shown by investors who backed the sector during less certain market conditions, this is likely to prompt further global capital to funnel into the market. While the outlook across UK real estate is not universally positive, we have noted increased interest in historically ‘alternative’ sectors including healthcare from an ever-wider pool of investors. Beyond specialist capital sources, overseas institutional investors and family offices, for instance, are also seeking to increase their exposure.
“Stock selection will be critical moving forward. As macroeconomic and regulatory uncertainty persist into 2026, cost pressures will continue to be front-of-mind for operators and investors. While fee increases have enabled operators to absorb a proportion of recent cost rises, questions remain over the sector’s capacity to further increase fees at a rate which offsets the impact of cost inflation on balance sheets. Established operators with modern, high-quality stock will be best positioned to outperform in the years ahead, and will likely be a key target for investors seeking to increase their allocations to the asset class in 2026 and beyond.”
