Care Market Insight: Development & Investment
Director, Jordan Rundle, shares his insight into the UK care development & investment market.
Image credit: Edmund Williams
2023 was a challenging year for the development market, with construction costs significantly inflating and financing costs increasing due to the Bank of England's interest rate rises. Gross Development Values have come under pressure with the outward movement in investment yields, although creative deal structuring and a shortage of good quality consented sites have mitigated the impact on land values.
Positively, the underlying business case for future-proof care bedrooms across many parts of the country remains robust, driven by long-term demographic trends. Consequently, there was an encouraging level of transactional activity in the care development market last year.
It is increasingly common to see larger schemes come forward, often over 70 bedrooms, to provide economies of scale in the construction process and optimise operating efficiencies. Some corporate operators are also expanding into wider geographical regions to enter relatively untapped markets such as the South West, Northern England, and South Wales. We expect this trend to continue in 2024.
The planning system has become increasingly unpredictable, protracted, and costly, with planning applications being refused at a higher rate. This has restricted the supply of consented sites despite the material need for new future-proof accommodation. Significant shortfalls in future-fit supply are therefore being exacerbated at a time when the population is ageing and acuity needs are increasing. The business case for new build development has never been stronger and, despite wider commercial land markets experiencing downward pressure in values, the lack of consented care home sites has resulted in land values holding up well. Our outlook for this year is very positive, and we expect to see strong levels of demand continuing for good quality opportunities.
To find out more about the healthcare development and investment market, or to have a confidential chat about your business options, contact Jordan Rundle: jordan.rundle@christie.com / 07711 767 180
