UK HEALTHCARE PROPERTY 2018 - SPRING MARKET OVERVIEW - Knight Frank
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SPRING
MARKET OVERVIEW
UK HEALTHCARE
PROPERTY 2018
A
Wetherby Manor,
Wetherby (Hadrian Healthcare)HEALTHCARE PROPERTY 2018 - MARKET OVERVIEW
RECORD YEAR FOR UK HEALTHCARE HEALTHCARE YIELDS V OTHER SPECIALIST SECTORS – Q4 2017
The past twelve months has represented a stern Furthermore, 2017 has seen a significant uplift continue in the year ahead. We will also continue
test for the UK healthcare market. Operators have in investment volume as demand for the sector to see a strong interest from overseas investors,
had to react to staffing challenges ahead of Brexit, is now at its highest level for over 20 years. taking advantage of the weak sterling.
social care funding crisis, the introduction of, and Strong fundamentals underpinning the sector
subsequent increase in, the National Living Wage continue to make healthcare an attractive A further trend set to continue in 2018, is the
and rising food and property costs. 2017 also investment proposition. Key trends have growing demand for care beds, driven by ageing
witnessed a shift toward personal care home included an increased demand for long-dated population and given the estimated shortfall of 9.50%
9.00% 9.00%
developments targeting the private pay market healthcare assets, appealing to pension funds 148,777 market standard beds by 2021 coupled
8.00%
in response to the shortfall of qualified nurses and both domestic and international investors, with 6,600 care homes at risk of closure over the 7.50%
within the UK. attracted by the circa 30 years unexpired next five years. 6.50% 6.00% 6.00%
JULIAN EVANS FRICS leases linked to RPI/CPI when compared with 5.50%
4.75% 4.75% 4.50%
Head of Healthcare, In spite of these operational challenges, the average commercial property lease length In the longer term, as is the case across all real 4.25% 4.25%
4.00% 4.00% 4.00% 4.00%
Hotels & Leisure occupancy rates for UK care homes rose of 7 years. The sector’s institutional appeal is estate markets, technology will play an even
for the fifth consecutive year, while average furthered by current bond market conditions, greater role in the sector’s evolution, both in terms
fee levels outstripped RPI inflation for the fourth with gilts producing lower returns. of operational care provision, as well as the design
year running. In addition, one-third of homes within of the physical assets.
the UK achieved EBITDARM as a percentage Meanwhile, further shaping the market has been
CARE SURGERIES PRIVATE ACUTE SPECIALIST SPECIALIST LONDON LONDON REGIONAL UK REGIONAL UK STUDENT
of income surpassing 30%. The disrupters the wide availability of capital to specialist funds
HOMES (PRIME) HOSPITALS CARE HOMES SCHOOLS HOTELS HOTELS HOTELS HOTELS ACCOMMODATION
also have not fettered investor appetite as that have taken a more holistic approach to (PRIME) (PRIME) (PRIME) (PRIME) (PRIME) (SECONDARY) (PRIME) (SECONDARY) REGIONAL UK
Knight Frank advised on a record volume of circa healthcare investment. Notably, Impact Healthcare
£12bn of Healthcare deals in 2017, most notably REIT purchased The Seed Portfolio for a
transactions in relation to Bupa Care Homes, handsome value of £149m in 2017. With investors
Helen McArdle Care, Porthaven Care Homes becoming more accustomed to the sector, we
and Regard Group. envisage a strong appetite for investment to
Fixed income
Going Concern
SOURCE: Knight Frank Research2017 - MARKET OVERVIEW
HEALTHCARE PROPERTY 2018 HEALTHCARE PROPERTY 2018 - MARKET OVERVIEW
TYPES OF HOUSING FOR OLDER PEOPLE DASHBOARD HEADLINES
GENERAL HOUSING RETIREMENT HOUSING HIGH DEPENDENCY ELDERLY CARE HOMES
Houses designed with older OVER 55 RETIREMENT SHELTERED RETIREMENT EXTRA CARE / RESIDENTIAL & NURSING
people in mind DEVELOPMENTS GRADE CONSTRUCTION BEDS EN SUITES LOCATION COMPETITION BUILD COST YP YIELD
VILLAGE COMMUNITY ASSISTED LIVING CARE HOMES
+
Future proof c.70> 100% wet rooms Excellent Very Limited c.100k – 200k 12> 4%>
SUPER PRIME
Purpose built (pb) c.60 100% en suite Good Restricted c.80k – 100k 8.5-10> 5-6%>
PRIME
1st generation
c.40 Part en suite Average Reasonable c.40k – 80k 7-8.5 6-7%>
and 1990's pb
SECONDARY
Period conversion < 30 No en suite Marginal High c.20k – 40kHEALTHCARE PROPERTY 2018 - MARKET OVERVIEW 2018 - MARKET OVERVIEW
HEALTHCARE PROPERTY 2017
UK 2016/17 CARE HOME RESULTS AT A GLANCE MARKET RENT COVERS
& SPECIALIST FUNDS ASIA PACIFIC FUNDS
up to up to
£250m £1bn
OCCUPANCY AVERAGE WEEKLY FEES INDICATIVE RENT COVER FOR CARE HOMES
89.2% 90.2% 88.7% £746 £651 £798
+ +
ALL CARE PERSONAL NURSING ALL CARE PERSONAL NURSING
STAFF COSTS (% OF INCOME) EBITDARM (% OF INCOME)
US REITS
up to 57.5% 54.8 % 58.5% 25.2% 28.4% 24.0%
£1.5bn MIDDLE EAST FUNDS
up to
PRIVATE EQUITY
FROM ALL AREAS
£150m
+ +
up to ALL CARE PERSONAL NURSING ALL CARE PERSONAL NURSING
£500m
SOURCE Knight Frank Research SOURCE Knight Frank ResearchHEALTHCARE PROPERTY 2018 - MARKET OVERVIEW HEALTHCARE PROPERTY 2018 - MARKET OVERVIEW
OUR PEOPLE
Knight Frank’s dedicated and highly experienced team provides a discreet and efficient consultancy service advising on the full spectrum of healthcare assets. Our award winning team continues to be recognised
BED DEMAND AND SUPPLY as leaders in their field. In taking time to understand the needs and objectives of our clients, we continue to provide uncomplicated property advice and solutions that add value at every stage.
HEAD OF HEALTHCARE, HOTELS & LEISURE VALUATION
ELDERLY CARE BEDS DEMAND AND SUPPLY DEBORAH JOYNT, MRICS GENEVIEVE LEWIS
KIEREN COLE, MRICS
JULIAN EVANS, FRICS Associate Partner Team Secretary
NUMBER OF NUMBER OF NUMBER OF
NUMBER % OF EN +44 20 7861 1147 +44 20 7861 5009 +44 20 3826 0604
CARE HOME SIZE NUMBER OF HOMES REGISTERED REGISTERED EN SUITE +44 20 7861 1563
OF HOMES % SUITE BEDS
BEDS BEDS % BEDS julian.evans@knightfrank.com deborah.joynt@knightfrank.com kieren.cole@knightfrank.com genevieve.lewis@knightfrank.com
1-35 beds 6,690 53% 142,207 30% 71,004 50%
12,914,584 471,129 ALYSSIA CLARE TOM KENNEDY, MRICS RICK TARVER, MRICS BUILDING CONSULTANCY
36-59 beds 3,759 30% 168,671 35% 109,106 65%
PA to Julian Evans Surveyor Partner
60-79 beds 1,503 12% 99,402 21% 84,621 85% +44 20 7861 1153 +44 20 3640 7029 +44 20 7861 1534 MERRICK RIMMER, MRICS
alyssia.clare@knightfrank.com tom.kennedy@knightfrank.com rick.tarver@knightfrank.com Partner
80-99 beds 457 4% 39,500 8% 34,927 88% +44 20 7861 1115
65+ Population by 2021 Demand by 2021
100+ beds 242 2% 29,709 6% 22,694 76%
RESEARCH AGENCY & DEVELOPMENT MARK TYLER, MRICS merrick.rimmer@knightfrank.com
Partner
Grand Total 12,651 100% 479,489 100% 322,352 67% MANDIP BHOGAL +44 20 3826 0686 MICHAEL BROWNSDON
SOURCE Tomorrow's Guides Senior Analyst JULIAN EVANS, FRICS mark.tyler@knightfrank.com Partner
* Average weekly fees 322,352 148,777 +44 20 3869 4702 +44 20 7861 1147 +44 20 3866 8046
mandip.bhogal@knightfrank.com julian.evans@knightfrank.com BELA CHAUHAN, MRICS michael.brownsdon@knightfrank.com
Associate
KIMISHKA NAIDOO NICK KEMPSTER, MRICS +44 20 3897 0037 PROPERTY ASSET MANAGEMENT
Current Supply Shortfall of Market Analyst Surveyor bela.chauhan@knightfrank.com
of Market Standard Beds * Standard Beds by 2021 * +44 20 3857 1999 +44 20 7861 5265 CLAIRE SMITH, MRICS
kimishka.naidoo@knightfrank.com nick.kempster@knightfrank.com DANIELLE O’CONNOR, MRICS Associate
SOURCE Tomorrow's Guides, ONS, LaingBuisson Surveyor +44 161 838 7747
* Market standard beds are rooms with en suite facilities
CORPORATE CONSULTANCY JULIAN WOOLGAR, MRICS +44 20 7861 5394 claire.smith@knightfrank.com
Partner, West End danielle.oconnor@knightfrank.com
PATRICK EVANS, MRICS +44 20 7861 1008 KNIGHT FRANK FINANCE
Partner julian.woolgar@knightfrank.com JENNY NOBLE LISA ATTENBOROUGH
+44 20 7861 1757 Office Manager Partner
paddy.evans@knightfrank.com LOIS BOND, MRICS +44 20 3866 8040 +44 20 3909 6846
Surveyor jenny.noble@knightfrank.com lisa.attenborough@knightfrank.com
+44 20 7861 5451
lois.bond@knightfrank.comHEALTHCARE PROPERTY 2018 - MARKET OVERVIEW HEALTHCARE PROPERTY 2018 - MARKET OVERVIEW
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