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Healthcare has long been a compelling story. Even those with a casual interest in population statistics would have known that the world is getting older, but as healthcare infrastructure struggled to cope during the pandemic, it was obvious that change was nigh.
Policymakers are now asking how to better prepare primary care services, such as hospitals, for these challenges. This will create opportunities for those with an appetite for the sector, as Primary Health Properties proved only weeks into the pandemic when it completed its purchase of medical centres in England and Wales saying that Covid-19 had “reinforced” the need for modern, integrated primacy care facilities.
The fact that so many hospitals were unequipped to deal with the crisis is unsurprising given that World Bank data shows the global average of spend on healthcare is only 10 per cent of GDP. As Deloitte asked recently: “Will healthcare continue to be managed as a cost, or will it be approached as an investment?”.
Spain is taking note. Some of its CCAA’s (autonomous communities) have shown willing to incorporate new regulations, as the pandemic highlighted where the healthcare system needed attention.
At an asset-level, Spain’s market isn’t as mature as the UK but it’s rapidly institutionalising. The undersupply of elderly care beds, combined with the fact that recent development has created future-proofed, purpose-built facilities, is a plus for investors eyeing the situation.
Many facilities created lately have been tailored to the new world-view. The move by Macquarie Infrastructure and Real Assets fund on a portfolio of Spanish state-of-the-art hospital facilities stocked with best in class equipment is one example.
But Spain is changing the way it cares for their elderly, as many families are unable to have older relatives living with them for as long as they once did. The elderly care market is still largely in the hands of family owners, who tend to own around 20 care homes apiece. We foresee that this will consolidate from around 200 operators to a handful owning around 40 nursing homes each.
We also expect consolidation in the UK’s elderly and primary care sector, where investment rose 173 per cent year-on-year in 2020. The changes needed to help GP surgeries run more efficiently, offer a broader spectrum of care and deal with larger volumes of patients, require investment that’s only viable at larger practices.
There have been significant transactions in hospital real estate, with BMI and Aspen portfolios trading. In London, healthcare is at the heart of new mixed-used schemes like Reef Group’s £150 million Cavendish Square, which will pitch hospital group HCA International alongside premium retail and leisure.
In the senior living sector, AXA’s Retirement Villages Group is building 5,000 retirement homes across 40 UK urban centres while Galliard, Probitas Developments and O’Shea are building a portfolio in the South East.
With residents relatively healthy and independent, the business model for such schemes is more akin to private hotels. Similarly, in Spain, investors want to make beautifully-designed residential complexes on the edges of Barcelona and Madrid, as well as San Sebastian and Marbella.
Healthcare, it seems, is about to get even more interesting.