The UK healthcare sector has seen stifled supply growth in care home beds in the past year despite ever-increasing demand, with data from leading global property adviser Knight Frank revealing that UK care home supply has grown by only 6% in the last decade, while the UK’s over 65 population has increased by 22% over the same period.
Knight Frank’s annual UK Healthcare Development Opportunities 2021 research report shows that total care home beds across the UK grew by 0.1% in the past year to 480,072 across 12,034 care homes. This is largely attributable to developers pausing operations to deal with the impacts of the pandemic.
The limited growth in new stock, far outstripped by the growth in the over 65 population, is coupled with concerns around the quality of existing units. Older care homes are often converted from other use and many fail to provide adequate facilities for elderly residents. 29% of existing beds lack en-suite facilities, an essential component of care provision, and 21% of UK homes are currently rated by the CQC as “requires improvement” or “inadequate”.
Furthermore, despite the partial abatement of the pandemic in 2021, the number of care home closures across the UK fell only very moderately in the 12 months to April 2021 versus the preceding financial year. Knight Frank expects to see an uptick in closures as the government concludes its year-long financial support package, which will result in a further shortage of beds.
However, Knight Frank’s report also highlights a number of positive indicators which point to a bounce-back in quality care provision post-pandemic. An increase in vaccination rates among existing residents has seen a rebound in occupancy in the second quarter of this year, following a decline from 89% to 79% in the 12 months to April 2021. This year has also seen the resumption of much of the construction activity which was paused or delayed as the pandemic took hold in 2020, leading to a healthy pipeline of new beds. 2021 has seen a return to near-pre-pandemic activity levels, with 35 new care homes (2,430 beds) delivered or due to be delivered by end of Q2, compared to 4,610 beds delivered in the whole of 2020. There are over 7,000 beds currently under construction and a further 10,000 in the planning or tender stage.
Julian Evans, Head of Healthcare at Knight Frank, said: “The pandemic has brought significant challenges for the provision of high-quality care home beds across the UK, and the sector needs substantial investment if it is to match the rising demand for care facilities. While the past year has seen a modest increase in the total number of beds, this rate of growth remains insufficient and we risk an imminent care bed crisis, especially given the projected surge in the UK’s over 65 population in the coming decade.
“It is vital that new homes are built and existing stock is upgraded to meet the standards required of care providers. Though development activity is showing signs of recovery, the industry is still grappling with the latent effects of the pandemic, and we expect these problems to persist into the next year. There are concerns over limited finance funding development in the sector owing to increasingly risk averse high street clearing banks being reluctant to take a development risk combined with increased cost of raw materials and labour. A full recovery will rest on the targeted use of granular data to map regional demographic trends and pinpoint opportunities for development.”
The UK is on the brink of a significant demographic shift that will see the over 85 population grow from 1.6 million in 2020 to 3.7 million by 2050. The growth in the UK’s elderly population is such that by 2050 an additional 350,000 people will potentially need an elderly care bed, almost doubling the level of bed demand within 30 years.
In anticipation of this rapid increase in demand for care home beds, Knight Frank’s Development Hotspots index gives an insight into which locations present the best future prospects for care home development based on analysis of 62 counties across England, Wales and Scotland. This year, counties in the South of England account for five of the top six areas of future care home development, with Greater London leading the rankings. This is driven in part by regional disparities in wealth and income as care home residents are increasingly self-funding their care. Low volumes of current and future supply also contribute to regional difference, with the development prospects for Cornwall and the Scottish Highlands both ranking highly as a result.
Knight Frank projects that the UK elderly care market is at risk of reaching capacity by the end of the decade, requiring as a priority the construction of new, high quality care homes and the renovation of existing stock to meet the needs of elderly residents and ensure the residential elderly care system is ready for the future. It expects that there will be an accelerated closure of tertiary assets and restrained care home development owing to building material inflation costs which will be exacerbated owing to further rising costs due to increased smart specifications necessary for future new build care homes.