New care homes in Glasgow and Edinburgh saw Scotland gain beds in 2018, but Stirling, Falkirk, and Clackmannanshire could prove to be the most fertile areas for future investment and development, according to analysis from Knight Frank.
The independent commercial property consultancy’s UK Healthcare Development Opportunities 2019 report found that Central Scotland was the country’s top region for new care homes for the second year running, with a current lack of beds, a strong forecast for elderly population growth, and limited new supply coming on stream.
Lothian and the Borders were joint second, albeit for completely different reasons. Lothian, including Edinburgh, is forecast to see the most robust economic and elderly population growth within Scotland. This translates into higher fees, creating significant opportunities for developers willing to pay the premium for land.
By contrast, the Borders has much cheaper land costs, but does not enjoy the same pool of wealthy older people. The Highlands and Islands also moved down to fifth place because of the
greater level of new supply in the pipeline – although much of it is still in planning.
The Knight Frank report also found that there was a net gain of 320 beds in Scotland in 2019/19, with more than 1,000 currently planned or under construction across Scotland. However, at just 6%, the low number of private-pay homes – homes that derive 70% or more of their income from self-paying residents – could act as a drag on development.
Iain McGhee, Partner, Knight Frank Valuation & Advisory, based in Glasgow said: “The development of new care homes is largely driven by the number of private-pay residents in any given area. Scotland has a number of pockets of affluence that offer great potential for new, state of the art homes but there is still an acute shortage of good quality beds and the development pipeline is still playing catch up – there are opportunities for investors willing and able to back new schemes in the right areas.
“Of course, the care home market is not without its challenges. Across the majority of Scotland, local authority referrals still underpin the market. This can be supplemented by private-paying residents but in order to attract the highest fees, developers need to ensure facilities meet the highest standards.”