Investors spent a record £2.7 billion (€3.13 billion) on UK healthcare property in 2020, 55% up on the preceding year according to Knight Frank. However, owing to concerns created by the pandemic, investment volumes in the elderly care sector fell to 18% of all healthcare property investment, compared to 39% across the preceding five years.
KF said there has been “surging interest” from investors in traditional sectors such as care homes and private hospitals, and also specialist facilities catering for mental health, learning disability and children’s services including children’s homes, foster care and schools.
Healthcare property also outperformed the rest of the commercial real estate sector, with returns in the sector holding strong at 6.3% in 2020, whilst the wider sector saw returns below the long-term average.
Investor types are wide ranging and as well as institutional players, capital is flowing into the sector from REITs and overseas investors. Overseas capital accounted for 72% of healthcare transaction volumes in 2020, substantially above the five year average of 41%.
“The year ahead will not be without its operational challenges as the sector looks past the COVID-19 pandemic,” said KF head of healthcare Julian Evans. “Despite this, we expect to see increased global and domestic capital directed at healthcare real estate as investors seek the safety provided by long-dated income the sector provides and look to de-risk and re-weight asset allocations out of retail and into alternative sectors; and the pandemic will likely accelerate investment into social infrastructure.”