The care home sector is showing signs of a slow and steady recovery from the pandemic, according to leading global property adviser, Knight Frank.
In its 2021 UK Care Homes Trading Performance Review, Knight Frank said care home operators were see to occupancy rates slowly rise as the pandemic shows signs of receding and demand remains strong.
Julian Evans, Head of Healthcare at Knight Frank, (pictured) commented: “Against the backdrop of the pandemic it’s encouraging to see the start of a rebound in the care home market. Rising occupancy rates and stabilising profit margins across the sector are an indicator of sustained demand for high-quality beds, and this year’s UK Care Homes Trading Performance Review points to its resilience.
“But there is no doubt that significant challenges remain. The impact of government support on profit margins is still an open question and the disparity in margins between new and old units is a cause for concern given the proportion of care homes which are more than 20 years old. However, if developers and operators focus on building new, high-quality homes and retrofitting older units, we remain confident in the future prospects of the sector.”
The report highlights signs of stabilising occupancy rates in the latter half of FY2020/21 after rates fell to 79.4% from 87.9% year on year during the first few months of the pandemic.
Knight Frank predicts this recovery will continue with evidence of increasing demand for beds with average weekly fees rising by 6.7% year on year.
While sector wide EBITDARM as a percentage of income fell from 26.8% last year to 26.2% in FY2020/21, Knight Frank expects profitability to be sustained thanks to the easing of restrictions and recovery in occupancy.
Furthermore, 11% of operators surveyed reported an EBITDARM margin of over 40% of income this financial year, signalling many operators’ capacity to adapt and withstand the challenges of the pandemic to deliver strong financial results and a continually high standard of care for residents.