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Competition and investment set to grow

January 22, 2019

With rising levels of investment, the care sector is evolving with the development of new high quality assets and greater competition in areas with a desirable location and demographic, according to the latest annual report by specialist business property adviser, Christie & Co.

The report, Business Outlook 2019: Navigate, Innovate, Accelerate, reflects on the themes, activity and challenges of the previous year and forecasts what 2019 might bring across the industries in which Christie & Co operates, including Care.

With significant corporate development activity taking place, the report notes that this has put pressure on some smaller operators and created competition for prime sites among regional and corporate providers. Market standards are also increasing as larger, new build care homes replace smaller non viable assets, with the report noting a 2.1% decrease in the number of care homes but a 2% increase in the number of beds since 2016.

The attractive, needs-driven fundamentals of the care sector, coupled with difficulties in more traditional parts of the property market such as high street retail, have created considerable interest from a wide variety of capital providers looking to invest in operational real estate. These include major institutional investors and global investment funds alongside specialist REITS, family offices and private equity.

From an operational perspective, funding and staffing are highlighted as the key challenges facing the sector, referencing Christie & Co’s Adult Social Care 2018 report, released last September. With a 13% drop in nurse registrations and local authority budgets remaining under pressure, the report says these issues are likely to continue in 2019.

The nursing deficit outlined by Christie & Co could be exacerbated by Brexit as a shortage of European workers, of which the care sector is a major employer, could further reduce supply and retention of staff. Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are;

  • Continued pressure on operators to improve services by the regulator,
  • A major OpCo sale anticipated along with further consolidation of providers,
  • The need for further clarity from Government on a long term funding solution with the delayed Green Paper, now promised by Easter.

Average prices remained economically positive throughout 2018 across almost every sector in which Christie & Co specialises, with Care seeing a 3.1% increase.

“2018 saw significant activity in the care sector across the value and ownership spectrum,” said Richard Lunn, managing director, care at Care at Christie & Co.

“A number of major transactions are occurring and yields are compressing to record levels given the influx of investment from a wide variety of capital providers.

“All the indications are that this should continue in 2019 if the uncertainty of Brexit is resolved.”

Michael Hodges, managing director – care consultancy at Christie & Co, said the care sector had a number of very strong fundamentals which are fuelled by the growth in a population which is living longer and with an ever increasing range of care needs.

“It is extremely encouraging to see the strength of investor interest in the sector and also the way operators are innovating with creative strategies to address workforce related challenges and improve care quality,” said Mr Hodges.

“The creation of a robust, long term funding solution for local authority funded residents is essential and we hope that the ongoing issues relating to Brexit will not further delay the publication of the long awaited Green Paper.”

  • The full report is available to access at: https://bit.ly/2RuAqH2

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