Christie & Co says that its care home property business is surging in the South West.
The specialist business property adviser’s South West team says it has completed on 40% more care businesses so far in 2016, and agreed deals at an increase of almost 25%, compared to the same period in 2015.
This growth of demand in the market comes despite the looming European referendum, as well as the implementation of the National Living Wage on 1st April, which was predicted to hit the care sector particularly hard.
Fewer care home businesses are running into financial difficulty, Christie & Co suggests, with the sale of care homes in distress in the South West region 25% lower than last year.
Stephen Jacobs, director of bank support & business recovery for Christie & Co, comments: “Although the implications of the National Living Wage are yet to be fully felt by most operators, this goes against the trend in other regions, such as in the North of England, where the number of distressed care businesses coming to the market has increased.”
Profitability in the sector continues to be found by care home owners increasing fees and executing cost-saving exercises. Christie & Co reports that more operators are focusing on the development of their properties, meaning that they can accommodate more service users and provide better quality facilities to justify charging higher prices.
Jonathan Southgate, business agent in the care team of Christie & Co’s Bristol office, suggests the industry is adjusting to the new pressures in the market. “With the National Living Wage adding 6-8% on the wage bill of an average elderly care home, margins will be squeezed and local authority fee increases will be scrutinised more closely than ever.
“Some local authorities have cushioned the effect of the National Living Wage by increasing their fees by more than they ordinarily would. Swindon, for example, has increased their fees by 6% whereas other authorities have been less generous, with Gloucestershire offering 1%.
“Despite obvious headwinds, investment and interest is still actively flowing into the sector from a range of parties, who are taking advantage of low interest rates and active bank funding. These include private equity houses and corporate operators, on top of expanding independent care groups and first time entrants to the sector.”