Lack of stock frustrates healthcare investors

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Total investment volumes into healthcare property declined to £350 million in 2016 as investors were frustrated by the lack of available stock, according to research by global real estate advisor Knight Frank.

This figure, which is approximately half the ten year average, reflects the severe undersupply of high quality healthcare facilities in the UK, where Knight Frank estimates there is a deficit of 2,600 beds. This shows little sign of abating, with increasing labour costs and the inflationary cost of raw materials with which to build new schemes likely to deter further development.

Despite these challenges, there remains strong appetite from investors to increase their exposure to the healthcare sector. According to Knight Frank, 81 per cent of the total volumes invested in the healthcare sector occurring over the last five years, with funds from Asia Pacific expected to lead the next wave of investment via forward funding opportunities.

Julian Evans, Head of Healthcare and Hotels at Knight Frank commented: “In order for the UK healthcare property market to thrive, the amount of facilities available must meet the demand from investors. The healthcare market remains an attractive option and new opportunity lies within forward funding. £120m of care homes closed in 2016 and both domestic & international investors are looking to take advantage of the under provision of care beds. ”