Care homes are looking more attractive to investors, says Savills
According to the latest market update from Savills Healthcare, strong fundamentals combined with an ageing demographic in the UK has made healthcare, and in particular, care homes, a very attractive asset class.
The international real estate advisor notes that the long indexed income with either RPI or fixed uplifts have made an appealing proposition for investors struggling to find similar opportunities in the mainstream markets. In addition, care home yields have moved in significantly over the last five years and now fall in line with many other traditional commercial asset classes.
Savills healthcare team director Chris Wishart said the last 18 months had seen care homes achieve unprecedented yields with those let to annuity grade tenants and in excess of 30 years unexpired attracting interest of levels below 4%
“We expect this trend to continue with the care home market being put under further pressure in the next three to five years due to an increase in the population and a limited amount of new homes coming out of the ground, which will ultimately drive prices higher and sharpen yields,” said Mr Wishart.
“As a result, we have seen care homes emerge into the investment arena with interest coming from a variety of buyers including REIT’s, institutions, pension funds and insurance companies seeking to diversify their portfolios. In addition, we expect the increase in activity from overseas investors, already witnessed in the mainstream markets, to become a reality in the healthcare sector with buyers from the US, Central Europe and Asia re-entering the market buoyed by the weakened Sterling.”
Savills cites the recent sale and leaseback of Gold Care Homes by US REIT, Omega Healthcare, as a prime example of overseas interest into the UK.