Specialist healthcare assets: what you need to know

Most healthcare property sectors have historically been state controlled with a limited level of private sector penetration. This has particularly been the case for the UK’s hospitals, mental health institutions and primary care facilities. But changing market dynamics mean that the healthcare property market is now extending far beyond elderly care. This article summarises the  drivers shaping some of those sub-sectors.

·         Adult Care and Supported Living residences: Care for vulnerable adults is currently in a period of transformation with a shift away from large institutional adult care homes in favour of smaller community-based supported living residences. This is due to a changing narrative on how care for vulnerable adults should be delivered, but also because supported living is a cheaper alternative cost to local authorities – the principle funders of adult care. In line with this, specialist supported housing REITs like Civitas and Triple Point have been raising funds and growing their portfolios in this sector. Civitas alone made acquisitions in excess of £240 million in 2018.

·        Primary Care: GP’s have traditionally operated as independent practices on contract to the NHS and classed as public sector operations. However, a tightening public purse is forcing the UK to examine alternative models of primary care. We have seen a growing number of commercial private-sector practices, now accounting for 6% of the primary care market by funding; a growing number of multi-practice GP groups, still part of the NHS family but more commercially orientated; and the emergence of listed property companies targeting a growing market for GP premises and creating a significant property market in the process.

·         Acute Care (Private Hospitals): The last economic recession stunted the growth of private medical care because funding was largely dependent on the uptake of private medical insurance which fell in this period. However, the sub-sector is now rebounding with NHS waiting lists increasing the preference for private treatment. There are also some signs that the NHS are allocating tranches of elective procedures into the private sector.

·         Childcare: The market for children’s nurseries, providing full-day care all year round, has seen significant growth in the last decade despite slowing in more recent years. While the market is still very fragmented, continued consolidation is expected to aid real estate opportunities as the market matures and commercialises. For-profit private sector providers like Busy Bees and Bright Horizons have already established significant portfolios.