Record investments in Dutch healthcare real estate
31 januari 2018
In 2017 a record amount of capital was invested in healthcare real estate. The total investment volume amounted to more than 700 million euros, an increase of almost 30% compared to 2016. It is expected that the number of investments in healthcare real estate will increase further in 2018. For 2018, Dutch and international investors jointly have more than 1.5 billion euros available to invest in this segment. This is one of the results of the annual survey by Capital Value into the developments on the Dutch residential investment market.
Investments in 2017
In the past year, interest from both Dutch and international investors as well as housing associations has increased significantly. Dutch investors and housing associations were responsible for the vast majority of purchases. Of the housing associations, Woonzorg Nederland was by far the most active in this segment and managed to add more than 1,300 social dwellings for seniors to its portfolio. A substantial number of transactions were also realised by international investors. In particular, Belgian funds invested heavily in Dutch healthcare real estate (more than 150 million euros) last year.
Looking ahead to 2018: Interest in healthcare real estate will increase further
Never before has so much capital for healthcare real estate been available on the Dutch real estate market. Investors are looking for profitable real estate. For a growing number of investors, the healthcare real estate market is coming into view as an interesting asset class. In the past year, interest in healthcare real estate from both Dutch and international investors has increased sharply. Many new parties are joining this segment.
The most important reason for the increased interest is the demographic development in the Netherlands and the associated healthcare needs. In addition, the regular residential investment market is suffering from a lack of suitable supply and returns are under pressure. Investing in healthcare real estate is an attractive alternative with good initial yields. In addition, healthcare real estate is less sensitive to economic trends. Finally, the supply of healthcare real estate will increase in the coming years. This means that it is expected that investors can also use the capital available. This results in an interesting risk-return profile for this asset class. The expected gross initial yields in 2018 are between 4% and 7%, depending on the region and the type of healthcare real estate.
1.5 billion euros available for 2018
For 2018 investors have a total of 1.5 billion euros available. In particular, Dutch institutional investors (over 700 million euros) and international investors (approximately 350 million euros) have a large volume available to invest in healthcare real estate. The remainder is expected to come from private investors. As in previous years, preference is mainly given to extramural healthcare real estate, followed by care homes with light or heavy care and health centres.
Investors indicate that they are particularly interested in new developments. Given the limited supply of new complexes, investments are also being made in existing healthcare real estate. The total capital available is expected to be higher, since the projected investments of housing associations are not
taken into account in this study.
Kees van Harten, managing director of Capital Value: "The stock of healthcare real estate will have to be expanded considerably in the coming years to meet the growing demand from users. It is a positive development that both Dutch and international investors want to invest a considerable share of their available capital in healthcare real estate. In order to further professionalise the healthcare real estate market, better cooperation between healthcare institutions and investors is a prerequisite: By emphasising the shared interests, both parties can benefit from the capital that is currently available for healthcare real estate."
More supply of good quality in 2018
In 2018, an increasing supply of quality healthcare real estate is expected. The new-build production in this segment is increasing. In addition, more existing healthcare real estate will come onto the market, mainly from housing associations and healthcare institutions. Due to changes in legislation and regulations, there is a shift of ownership. Housing associations are focusing more on senior housing in the regulated segment within the core region and are increasingly looking for opportunities to sell healthcare real estate outside the region. Healthcare institutions have been confronted with various system changes in the sector in recent years, as a result of which they are increasingly considering taking the healthcare real estate off the balance sheet and are looking for cooperation with an investor. Healthcare institutions can use the liquidity released for the core task: providing good care.
Strong growth in user demand
The number of households in the Netherlands will increase significantly in the coming years. The number of households aged 75 and older will increase the most, both in absolute and relative terms. In the period 2018–2030, the increase will be more than half a million households. In 2018 the share of 75-plus households will be 12.3% and in 2030 17.6%.
Manon Kuipers, specialist healthcare real estate at Capital Value: "This mainly concerns single-person households. Older people have a higher life expectancy and continue in a single-person household longer. Because of extramuralisation, older people with a slight care indication continue to live independently for a longer period of time. It is important that suitable housing for elderly people with a mobility restriction comes into play. For this target group, too little has been built in recent years.This requires planning at local level."
For more information on our services regarding healthcare real estate, please contact our Healthcare Desk.