The U.K. saw a net loss of care homes in 2017, presenting the country with a care crisis, but also a £15B opportunity for the real estate sector.

According to research from Knight Frank, there was a net loss of 117 care homes last year, equating to 388 beds. That is smaller than the 2,612 beds lost in 2016, because the homes closing were small, and some new, large, purpose-built facilities were completed.

Real estate is supposed to be an industry that capitalises on imbalances in supply and demand. But in spite of the shortage of beds — and the demographics of an ageing population will exacerbate this — it remains an underdeveloped sector of the U.K. property market, Knight Frank said.

It estimated that an investment of £15B was needed to meet current and future demand.

“The U.K. healthcare industry is less developed than other sectors and therefore requires substantial investment in order to keep pace with present demand, let alone the provision that is going to be needed for the future,” Knight Frank Head of Hotels, Healthcare and Leisure Julian Evans said. 

“We estimate that we require in excess of £15B to upgrade existing beds in order to future-proof and that approximately 6,500 care homes are at risk of closure over the next five years, which equates to 140,000 beds.”

Evidence suggests that the care homes are closing due to a range of factors, including the continued impact of the National Living Wage that has further affected an already constrained labour market and ongoing staffing challenges, including an acute shortage of qualified nurses, Knight Frank said.

In addition, many buildings are not fit for purpose and there is insufficient funding available for reinvestment into existing care homes, combined with building material cost inflation which has served to restrain new care home development.

Knight Frank said Greater London, South Glamorgan, Buckinghamshire, Berkshire and Cambridgeshire were the best spots to build new care homes.

One investor that has made a play in the sector is Cheyne Capital. This week it refinanced the 30-home portfolio of Country Court Care and also provided it with a £51M loan to build seven new facilities.