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UK healthcare sector attracts record investment volumes: KF

[Photo: National Cancer Institute/Unsplash]

Record transaction levels are expected in the UK’s healthcare property market during the fourth quarter of the year according to Knight Frank. The firm points out that already year-to-date figures are 25% more than at the same point last year.

In the whole of 2019 UK healthcare property attracted investment of £1.76 billion but £2.24 billion has already been invested in the sector during 2020.

And a number of “prominent and high value deals” are expected to complete in Q4 which, Knight Frank predicts will lift the quarterly total to its highest ever.

These high-profile deals include England’s largest mental healthcare provider The Priory Group (£1.5bn), mental health services provider Elysium Healthcare (£900m), children’s care and education services provider Keys Group (£250m) in addition to another £3bn of specialist (mental health, learning disability) providers and £1bn of broader healthcare property transactions.

KF says both merger and acquisition and fixed income activity account for the increased volumes. The firm said that there has been increased investor interest in healthcare property in “traditional” sectors such as care homes and private hospitals, but there is also rising demand for specialist assets and providers such as mental health, learning disability and children’s services including children’s homes, foster care and schools.

Pandemic revealed lack of government investment

Head of healthcare at Knight Frank Julian Evans said that the pandemic has “shone a light on the UK healthcare sector”, demonstrating both the very best of the UK’s healthcare sector and collaboration between the private sector, social care sector and NHS. But it has also highlighted, “the lack of investment by successive governments into the sector, and therefore the urgent need to prioritise preventative and crisis funding.”

He said that investors’ appetite for healthcare real estate remains strong, strengthened by limited supply and an awareness of “the ever-growing demographic fundamentals for these assets which are driving the sector”.

“As a result, there will undoubtedly be a flight to quality as investors seek defensive healthcare assets and we anticipate that investment into the sector will continue to rise, from a broad church of domestic and overseas investors,” Evans said.