In 2018 almost 1 billion euros invested in healthcare real estate
22 januari 2019
In 2018, a record amount was invested in healthcare real estate. In total, the investment volume in this category in 2018 amounted to € 945 million, a 35% increase compared to 2017. At 95%, the largest portion of the transactions concerned care homes. The share of care homes in the residential investment market therefore comes to 10%. It is expected that the number of investments will increase further in 2019, although the supply will lag behind demand. These are the first results in the healthcare real estate segment of Capital Value's annual survey of developments in the residential investment market.
A look back at 2018
The interest in healthcare real estate has grown enormously in recent years. Records were already broken in 2017 with an investment volume of € 700 million. This upward trend continued in 2018. However, the lack of supply of good quality healthcare real estate in 2018 meant that not all the available capital for this segment could be used.
More investors specifically focusing on healthcare real estate
The number of investors in healthcare real estate has grown compared to 2017. In 2017, the bulk of the transaction volume was attributed to a number of Belgian investors. In 2018, a better balance emerged between investments by Dutch and international investors. The healthcare real estate market requires specific knowledge of the healthcare system. In addition to institutional investors, more private investors have started to specialise in this segment. They focus largely or exclusively on care homes and healthcare centres. These specific investors are particularly interested in either new-build projects or recently built developments, since these dwellings meet the requirements of today's elderly people, who not only have to live independently for longer, but also have more to spend than in the past. As a result, they have higher requirements with regards to their living environment, the services that are provided at home, the residential care concept, and for the dwelling itself.
Outlook 2019: Interest will increase further
The need for good healthcare real estate continues to grow. Due to the growing demand from users and the attractive return-risk ratio, the number of investors on the market is growing. In addition, more and more collaborations between healthcare parties and market parties are emerging, with the development of new (care) initiatives. The expectation for 2019 is that more new-build developments and redeveloped healthcare complexes will come on the market compared to previous years. Various (large) transactions will also take place, with housing associations disposing of the healthcare real estate that does not fit their portfolio strategy.
Available capital
Specialised investors in care property, such as care funds, indicate they have around 1.7 billion euros available for investments in care property. This is a sum of amounts mentioned by institutional, private and international investors and housing associations. In total, 32% of international investors indicated to be looking for investment opportunities in care homes, whereas 25% of institutional investors says to be willing to.
Increase in the number of extramural households
Despite new technical possibilities, the housing stock will have to be further tailored to the needs of mobility-restricted households. Assuming that the relationship between age and reduced mobility does not change, the number of households living extramurally with reduced mobility will increase by 115,000 over the next five years. Over the longer term, the numbers will be even greater. In the over-75 households group, this largely concerns households with moderate or severe reduced mobility.
Required increase in the number of suitable homes
The demand for suitable housing relates both to the rental and the owner-occupied segment. A total expansion of 75,000 homes is needed in the non-regulated rental sector over the next five years. This expansion would ideally consist of 47,000 regular care homes, 17,000 homes with no stairs, 3,000 adapted dwellings and 8,000 clustered dwellings. In the longer term, more dwellings specifically tailored to reduced mobility are required. In the regulated rental sector, a significant expansion of adapted (6,000) and clustered (16,000) dwellings is required.
Shortages stand in the way of housing market flow
The National Housing Agenda mentions senior citizens as a target group for which the housing market opportunities must be increased. Although seniors are increasingly inclined to move, they are unable to find the (single-storey) dwelling they are seeking. The shortage of care homes continues to rise every year because the group of senior citizens is getting bigger and bigger, while insufficient numbers of suitable dwellings are being built. If the new initiatives and collaborations lead to better quality dwellings for the elderly, where they can continue to live longer with less mobility, the flow on the housing market will improve. Given the available capital from various investors, it is expected that more suitable dwellings for the elderly will become available in 2019.
According to Kees van Harten, Managing Director of Capital Value: "In order to meet the growing demand from the target group, intensive cooperation is required between investors, housing associations and healthcare parties. Developers are also increasingly specialising in the realisation of healthcare real estate. Thanks to the considerable amount of capital available, there are many opportunities in 2019. The challenge is to utilise the capital in the right way and to invest in an appropriate offering for the target group. It would be a good thing to include the care home component for the long term in performance agreements or policy at municipal level in light of the growing need for it. If this is successful, more capital can be used effectively in 2019 to tackle the shortages in this segment."