Global property adviser Knight Frank has predicted a 30% rise in care home costs in 2022.
Knight Frank said the rise was being driven by a 12% increase in agency costs combined with insurance and utilities becoming more expensive and challenges with supply chains that are further impacting build costs.
Challenges from higher costs are expected to result in a lag of new beds during 2023-24 exacerbating a long-term shortfall which Knight Frank predicts will reach 58,000 beds by 2035 with an additional 350,000 people needing elderly care by 2050.
The global property adviser added that with 100,000 beds at risk of closure, existing operators would benefit from an increase in occupancy as demand outstripped supply.
Looking ahead, Knight Frank predicted a rise in dementia and nursing care specialists, the importance of clinical outcomes and KPIs, design adaptation for future COVID-19 events, a growth in technology and telemedicine, and larger care home sites to include independent living units.
The property specialist said that despite its challenges the sector remained attractive to institutional investors and pension funds due to its resilience and defensive characteristics.
Julian Evans, Head of Healthcare at Knight Frank, (pictured) commented: “As we continue to recover from the pandemic there is a sustained demand for high-quality beds, and increasing attraction from investors and pension funds.
“However, increased costs and disruptions in the supply chain are posing significant challenges to the development of the much-needed quality new build care homes. We currently face the perfect storm posed by rising costs of labour, supply and finance and if we do not act could risk a crisis in care provision. Urgent action from the government is needed to support this essential sector as it strives to deliver for our ageing population.”