Healthcare

The investment volume in healthcare real estate fell significantly in 2023. While demand for expansion and sustainability was high, the transaction volume in the healthcare sector failed to get past €460 million. Factors contributing to this are uncertainty in the market and higher initial returns that put pressure on new-build projects and price expectations. The supply of existing healthcare real estate is still limited, but this is set to change given the significant investment challenge. We are expecting the investment volume to rise to €550 million in 2024.

Trends and developments

• The sustainability of the current healthcare provisions and availability of enough care homes going forward are high on the political agenda, as was evident during the last parliamentary elections. The return of publicly funded care homes is not realistic, but there is widespread support for expanding clustered housing for elderly care. Municipalities are increasingly taking the reins in residential care and promoting the construction of care homes in new-build construction or conversion projects.
• With living at home increasingly becoming the basis of residential care, the difference in initial returns between assisted living and traditional housing is narrowing. The availability of healthcare, services and facilities adds value for the consumer – particularly the elderly – and with that to the real estate itself. For investors, assisted living in the form of individual rental or master lease has become more attractive. This combined with potential alternative uses makes the risk profile lower than before.
• Investors and healthcare organisations are increasingly forming strategic partnerships. Investors are inclined to attach importance to having a healthy operation and tenant as a prerequisite for a sound investment. At the same time, it is in the interests of healthcare organisations to have a good real estate partner, given the increasing investment pressure in healthcare real estate and healthcare organisations’ shrinking investment capacity. Healthcare organisations are assessing their real estate and their role as owners and/or users more critically. Divestment of real estate, either partially or entirely, releases capital for other investments. This can lead to more transactions in existing healthcare real estate, for instance in sale-and-leaseback contracts.
• A trend we are witnessing across the real estate market as a whole is that pension funds and insurance companies are taking a step back and are submitting more redemption requests. In the healthcare sector, we are seeing the opposite: investors are in fact expanding their capital. They are doing this partly based on impact funds, which can acquire affordable healthcare real estate against different risk or return profiles. New impact funds are being created, and healthcare is increasingly becoming a crucial part of the profile. This will bring more liquidity to the market, which in turn will promote growth and sustainability in the sector.

Analysis of healthcare

The healthcare sector is facing a major challenge in terms of quality as well as quantity. Compared to other sectors, moves to make healthcare real estate more sustainable are lagging behind, and there is a serious shortage of care homes. Fortunately, we have noticed that buyers are becoming more active in meeting these challenges, and that they have specific renovation and expansion plans when buying real estate. This trend, combined with the increasing share of sale-and-lease-back structures, shows that a mind shift is underway involving a move towards healthcare and real estate organisations joining forces to address the quantitative and qualitative challenges they face. With the prospect of an increase in liquidity in the healthcare real estate market, the sector is gearing up for a positive development.