The overwhelming majority of investors have either maintained or increased their investment allocations since the COVID-19 outbreak, with 16% stating that they have increased their allocation to healthcare real estate by more than 25%. This is according to the CBRE UK Healthcare Sentiment Survey, which surveyed investors, developers, operators and lenders with a combined investment of nearly £24bn.
Investor demand has been resilient throughout the pandemic and although investment activity has slowed, pricing has generally been stable. 88% of respondents expect demand to continue to rise, which we would expect to drive an increase in pricing. Currently, Elderly Care and Retirement Living are the sectors seeing the most interest from healthcare investors.
Tom Morgan, Head of Healthcare comments: “The Healthcare sector has become a key area of focus for investors. At a time of wider-market uncertainty, the sector’s needs-based demand characteristics, underpinned by a compelling demographic story in the UK, have grown in appeal as evidenced by the acquisition of Priory Group for over £1bn at the end of 2020 in which CBRE advised Medical Properties Trust, the funding partner to Waterland Private Equity.”
The survey results show that COVID-19 has shaped the investment decisions of a significant proportion of respondents, with around 40% of respondents mitigating reputational risk by adjusting their criteria for higher quality stock and strong management that supports infection control.
Tom Morgan continues: “It is becoming increasingly clear that the main weight of capital is focusing more heavily on quality. This applies to both the physical asset and the quality of the operation and its management. We therefore expect fit-for-purpose, well operated healthcare assets with solid demand fundamentals to benefit from this shift in investor demand.”