Investors target Midlands healthcare sector

Property investors and developers are planning to deploy more capital in housing and care provision for the elderly in the Midlands, according to new research from CBRE.

The region has a chronic undersupply of senior living development, according to the property consultancy’s 2024 UK Healthcare Sentiment Survey, with private investment in the healthcare sector historically focused on London and the South-East.

Phil Schmid, a senior director in CBRE’s Operational Real Estate team, says this is set to change: “Across the UK, the population is getting older. Baby boomers are hitting their 70s now and life expectancy has increased. There are 11million over 65s across the country and this is set to rise by a further 10% over the next decade.

“We certainly see this in Birmingham specifically, where the 2021 Census showed a third of the city’s population growth was in the 50-59 age bracket. There was a 9% increase in over 65s, to 12,500, with a 20% rise in over 90s to almost 8,000 people.

“Against this backdrop, there is an urgent need to address the city and wider region’s senior housing and care home stock, and property investors and developers are indicating they will step up.”

According to Mr Schmid, the crisis is not just about demand outstripping supply. It’s also driven by the poor state of the existing stock in the city region.

He said: “Much of the stock, whether that’s care homes, private hospitals or senior housing, is dated and no longer fit for purpose. For example, lots of care homes are in period conversions, with narrow corridors and doorways, lacking in ensuite facilities and inefficient from an energy perspective. Much of healthcare real estate in the region is more than 25 years old.”

CBRE’s survey canvassed more than 200 investors, developers and providers across the UK, with a combined investment of more than £8bn and providers having more than 150,000 care home beds.

All three respondent sectors anticipate funding new healthcare schemes. Investors plan to increase their allocation to the sector by 62%, 70% of developers are planning to take on more healthcare projects and 50% of providers intend to grow their portfolios over the next five years.

However, delivering senior living product is not without challenges.

Mr Schmid said: “The development environment is challenging, with long planning timelines, construction inflation and high land costs.

“However, healthcare is a resilient asset class, with increasing demand and traditionally, long lease terms. The fundamentals are robust, particularly in the Midlands where there is a chronic stock shortage.”