– COVID-19 impacts occupancy but long-term drivers remain –
– Buckinghamshire named as top location for care home development –
The UK care home sector has seen a minimal increase in in the number of beds but this is failing to keep up with demand, with the number of care home beds per 100 people over the age of 85 falling by 5% since 2010, according to the latest research by leading global property adviser Knight Frank.
The annual UK Healthcare Development Opportunities 2020 research report shows that while the number of care home beds increased by 2,500 in the last financial year, the number of homes fell to 12,170 nationwide. This is driven by smaller outdated care homes closing whilst larger, purpose-built care homes or existing homes are adding beds to create more efficient and viable schemes throughout the UK.
Whilst new stock replacing old and outdated stock is a positive step forward, the extent of home closures and de-registrations taking place means that the market is in fact struggling to expand at the pace required for future demand. In the 2019/20 financial year, a total of 7,058 beds (122 homes) were newly registered and 6,789 (233 homes) were de-registered.
The Covid-19 pandemic has highlighted the need for investment and innovation in the UK healthcare property sector, especially considering that 70% of UK care home facilities were built prior to 2000. As such, many operators are considering how to upgrade their existing portfolio and refurbishment will remain vital along with new developments to keep up with the long-term demand due to an ageing population combined with the accelerated closure of underperforming assets.
Knight Frank’s research identifies a potential 6,500 care homes at risk of closure over the next 5 years, equating to 140,000 beds and estimates that the UK requires in excess of £15 billion to upgrade existing beds in order to future-proof for the ageing population. This shortage will be exacerbated by the increased demand for care homes by 2050, which will see a national bed crisis in the UK as the share of people over the age of 80 is expected to surge over the next 30 years, with one in ten adults set to be over 80 by 2050, compared to one in twenty currently.
Julian Evans, Head of Healthcare at Knight Frank, said: “The UK healthcare industry requires substantial investment in order to keep pace with present demand, let alone the provision that is going to be needed for the future as the population continues to age. Whilst the overall bed numbers have increased, this is still nowhere near enough to address the crisis in provision and is likely to be further exacerbated as the next generation ages at a faster rate than new care homes can be developed.
“This has been accelerated by the COVID-19 pandemic which has accelerated trends that will lead to closures of care homes that are no longer fit for purpose, resulting in a significant national shortfall of bed provision.
“Once the situation resolves around the COVID-19 crisis, we will see numerous changes around how operators fare and we expect that with the scarcity of stock and a continuing ageing population driving demand, the investment appetite for care home developments will remain strong from a range of investors. There are opportunities for both investors and developers across the entire UK, with our Hotspots Index highlighting the range of opportunities nationally.”
The Knight Frank UK Care Home Development Index identifies which UK locations present the best prospects for investment and development. This year, Buckinghamshire leads the hotspots list in England, pipping Greater London. The top five in England and Wales are Buckinghamshire, Greater London, South Glamorgan, Berkshire and Cambridgeshire.
The Covid-19 pandemic has placed additional pressures on the care home market which had already seen closures due to ongoing staffing challenges, with an acute shortage of qualified nurses, combined with restrained care home development owing to building material inflation costs.
Knight Frank expects that care home design will adapt to meet future virus experience and that care homes will need to innovate their operational procedures post Covid-19, including an increased use of telemedicine. It expects that there will be an accelerated closure of tertiary assets whilst due to increased smart specifications necessary for future new build care homes, the cost of raw materials will further increase.