COVID concerns impact elderly care home investment, Knight Frank reveals

Julian Evans

Concerns over operational challenges facing elderly care home operators led to a sharp drop in investment volumes in 2020, Knight Frank has revealed.

Data from the global property adviser showed elderly care property transactions fell by 40% in 2020 to £499m from £845m in 2019.

The decline took place against a backdrop of record investment levels in the overall healthcare property market, which totalled £2.7 billion despite the COVID-19 pandemic, 55% higher than 2019, as investors sought stable returns and long-term secure income.

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As a result, the elderly care sector’s share of all healthcare property investments fell to 18% from an average of 39% across the last five years.

Julian Evans, Head of Healthcare at Knight Frank, (pictured) said: “Investment appetite for healthcare real estate remains strong, both in more traditional assets such as care home developments as well as more specialist assets including the increasingly popular mental health services sector.

“This demand is only strengthened by the limited supply within the healthcare market combined with the awareness of the ever-growing demographic fundamentals for these assets which are driving the sector and make it largely recession-proof amidst testing economic conditions in 2021.

“The year ahead will not be without its operational challenges as the sector looks past the COVID-19 pandemic. Despite this, we expect to see increased global and domestic capital directed at healthcare real estate as investors seek the safety provided by long-dated income the sector provides and look to de-risk and re-weight asset allocations out of retail and into alternative sectors; and the pandemic will likely accelerate investment into social infrastructure.

“We expect to see more investors target new development opportunities through both direct investment and lending. This inward investment is vital for the future of the sector.”

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