Age Not Covid Means Health(care) Generates Property Wealth
An aging population — not continued concerns around Covid-19 — means record-breaking sums will be poured into healthcare property in 2022.
Knight Frank said the $9B (£7.6B) invested in healthcare property in Europe in 2021 could be matched or exceeded in 2022.
Lack of consolidation in fragmented markets will present real opportunities to both investors and operators, Knight Frank said in data published Wednesday, predicting a “trajectory of robust growth”.
The investment case for European healthcare property is driven by Europe’s rapidly aging population, it said.
The number of Europeans over the age of 65 is projected to grow by 29% by the year 2050, whilst the over 80s population is set to rise to over 11% from circa 6%. The inevitable result is a demand for more care beds, particularly in the key investment markets of the UK, Germany and France.
Investors are increasingly looking at specific sectors within the European healthcare sector including specialist care and specialist senior housing, with €3.8B (£3.2B) invested in senior housing and care in Europe in Q4 2021, the highest volumes on record. Knight Frank expects that there will be further expansion into these subsectors within the European healthcare market from UK and international investors.
The UK’s share of European investment has ballooned from 14% in 2020 to 26% in 2021, placing it second after Germany, which scooped 31% and 33%, respectively. But the UK is unusual in some respects, with an elderly care sector that is relatively smaller and fragmented, but more tilted toward the private sector, than those of the European mainland.
The top five UK providers of elderly care beds — HC-One, Barchester, Four Seasons, Care UK and Bupa — have 61,000 beds between them, around 13% of the market. In Germany the top five have 102,000 beds, and in the Netherlands 153,000, and the share of the market controlled by the top five rises to 29% in France and 33% in Belgium.
However, Knight Frank noted that the UK market is more heavily dominated by the private sector. For-profit operators account for 83% of the market, with the nearest rivals Germany and Belgium, both on 42%.
The European healthcare market is led by several key operators including Korian and Opera. Korian has significant presence in five of the seven regions, consolidating its market dominance following its acquisition of UK provider Berkley Care last year and both Opera and Korian feature in the top two of six of the key markets, with the exception being the UK.
“The coronavirus pandemic unsurprisingly increased awareness of the European healthcare market and the asset classes under that vast umbrella," Knight Frank Head of Healthcare Julian Evans said. "As demographics continue to shift, the demand for quality healthcare shows no sign of subsiding and only strengthens the already growing investment case.”
The three largest investors in European senior housing and care over the past 24 months have been Vonovia SE, Cofinimmo and Aedifica, each of which have invested approximately €1.2B (£1B) of capital throughout Europe.
Knight Frank firm also tipped growth in healthtech. The combined value of European healthtech companies has grown six-fold between the years 2016 to 2021, reaching a total value of approximately €40B from 2016 to 2021, led by telemedicine, as well as insurtech firms. Total volumes still lag behind Asia and the U.S.