Business Outlook 2026 | Care UK

In this section, we explore the UK care market in 2025 and provide predictions for the sector in 2026.

Market Overview

The UK care home investment market continues to attract significant interest, particularly from US-based funds. A notable trend is the emergence of management contracts under the RIDEA structure, which allows REITs to own both the operating company and the underlying property - this model has already been adopted by major players, with Welltower acquiring Care UK, Barchester, and HC-One under this framework. Despite these structural shifts, yields have remained relatively stable, ranging between 6% and 10%. At the same time, international investors are showing increased appetite for exposure to the UK market, reinforcing its position as a key sector for global capital.

The pace of new care home developments continues to lag behind market demand, largely due to a drawn-out planning process and the limited appeal of certain areas where private pay is scarce, resulting in 77 new build care homes opening over the course of the last year, providing an additional 4,795 beds at an average size of 62 bed spaces. In the past year, there has been a larger number of beds created by extending existing care facilities, with an additional 6,551 beds being built via the extension of 156 existing care homes. Although construction costs remain high in many regions, there were signs of this easing during the second half of 2025, which is a positive shift for the development sector.

Trading performance across the sector has generally improved, supported by strong occupancy levels and a reduction in reliance on agency staff. Positively, the number of distressed cases handled by our team decreased by 22% in 2025, reflecting improved trading conditions across the sector.

Transactional activity heightened across assets of all sizes last year - from small seven-bed homes to large facilities with over 100 beds. Meanwhile, not-for-profit providers continue to rationalise their portfolios, adding further momentum to market dynamics. Many operators are now seeking opportunities to expand, even as the number of care homes coming to market has fallen by approximately 15% - this dip could be attributed to there being a period of steady state in terms of trading performance, post-pandemic, leading many providers to expand rather than sell. Bank appetite for lending within the sector remains positive, and there is a notable emergence of a strong first-time buyer market.

Our annual sentiment survey (full results below) highlights the funding and operational challenges that care operators continue to face, as 38% of respondents said they feel negative about the year ahead. The overall position, however, feels more optimistic, with 62% of respondents saying they feel either positive or neutral about the sector in 2026.

Richard Lunn

Managing Director - Care

Key Market Trends

Price Index

Movement in the average price of assets sold, year-on-year.

Occupancy rates are now generally exceeding pre-pandemic levels, and staff costs are under control. The sector is benefiting from foreign sponsorship licenses, which have led to a decline in agency costs over the past couple of years. Despite some press indicating otherwise, the majority of providers are showing improved profits as a result. This, combined with the limited supply of stock entering the market, is leading to competitive bidding and driving prices upwards. Many lenders are also turning on the tap once again, and the industry continues to attract new investors seeking a more defensive-oriented market.

Market Sentiment

We anonymously surveyed care professionals across the country to gather their views on the year ahead.

Market Predictions for 2026

Momentum in the transactional market will continue as the cost of debt eases.
We’ll see the continued emergence of new entrants providing a going concern exit route for smaller care home owners.
An ongoing shortage of new-build openings will limit new bed supply, and occupancy levels will remain strong.
Healthcare will remain an attractive asset class for both UK and international investors, with REITs acquiring portfolios to provide traditional leasehold or management agreement models.

Case Studies

Astell House Care Home, Cheltenham

Astell House is an imposing period care home registered to accommodate 36 residents. It is located in one of the most sought-after residential areas of Cheltenham, within easy reach of the town centre and local shops.

The home was previously owned by Lillian Faithfull, a Cheltenham-based charity that operates non-profit care homes. Following a strategic review, Lillian Faithfull chose to divest the properties to concentrate on its existing portfolio and sought a buyer that shared its values and commitment to care.

In December 2025, the home was sold to Kenmore Group Care Homes, marking a significant addition to its growing portfolio of care homes.

St. Bernards residential home, Solihull

St. Bernards is an established, family-run residential care home registered for up to 43 elderly residents. It occupies a converted, extended property in Olton, a suburban village within the Metropolitan Borough of Solihull in the West Midlands.

The home has been owned by the same family for 43 years, spanning two generations, and was brought to market because they felt that they had achieved so much and wanted to slow down to pursue other interests, including a new mindfulness project.

In April 2025, the home was sold to an established multiple-care home operator.

Project Southern, Scotland

Pacific Care is a premium group of five care homes and one care centre located in the West of Scotland.

Originally formed in 1998 by brothers Brendan and John Brawely, Pacific Care offers five-star nursing care to the elderly and is renowned for its high-quality, purpose-built properties and outstanding digital technologies. The group’s reputation is evidenced by its consistently high Care Inspectorate grades of four and above, regular awards, and a 9.8 out of 10 rating on Carehome.co.uk.

Three of the homes, Birdston Care Home, Lillyburn Care Home and Kintyre Care Home, and the activity day care centre, Birdston Day Care, are set in the same ‘care campus’ in Glasgow. The remaining properties, Mosswood Care Home and Stanley Park Care Home, are located in Paisley.

Group-wide, there is a total of 219 beds and 40 day care residents, and occupancy rates have consistently remained over 90 per cent.

Care development site, Somerset

In January 2025, we brokered a turnkey transaction for specialist care home developer, Mercian Developments.

The consented 68-bedroom state-of-the-art scheme benefits from en suite wet rooms, flexible day spaces, and luxury resident amenities. The care home boasts exceptional sustainability credentials and is expected to achieve a BREEAM “Very Good” accreditation. The scheme was pre-let to Amica Care Trust, a growing regional not-for-profit provider in the region, and the development is being funded by Aberdeen Investments on behalf of a segregated client.

The care home is due to open in 2026/27.

[CGI: KWL Architects]

Date	Business	Purchaser	Details
Apr	Athena Healthcare Group	Welltower	Based in the North West, Athena offers a range of services including residential care, tailored nursing care, and specialist dementia care.
Apr	Four Seasons Health Care Group	Omega	The acquisition of the remaining Four Seasons Health Care Group portfolio.
May	Stow Healthcare	CGEN Group	CGEN Care Group Ltd acquired Stow Healthcare Group, an award-winning East Anglian-based care home provider, for an undisclosed sum.
May	Care REIT	Care Trust REIT	This transaction marked CareTrust’s entrance into the UK market and represents a strategic step in the company’s mission to expand and diversify its portfolio of healthcare real estate assets.
June	Spectra Care	Optimo Care Group	This deal strengthened Optimo’s South East presence and enhanced its capacity to deliver person-centred, community-based support for individuals with learning disabilities, autism, and complex care needs.
Aug	Artisan Care Group	Avery Healthcare	Avery Healthcare acquired Artisan Care Group, the owner of 10 newly developed care homes. This transaction bought 774 additional beds under Avery’s ownership and management, strengthening its position as a leading luxury care home operator.
Sept	Target Healthcare REIT	Undisclosed buyer	Target Healthcare REIT sold nine UK care homes for £85.9 million in late 2025 to an unnamed institutional buyer.
Sept	Select Healthcare	Foundation Partners and Deer Capital	This portfolio sale included 32 residential care homes, making it a market-leading transaction due to the number of services and the breadth of care provision.
Oct	Barchester + HC-One	Welltower	Welltower completed the purchase of Barchester Healthcare and HC-One in a landmark double-deal worth more than £6 billion.
Oct	Aria Care	Welltower	Aria Care - which offers residential, nursing, and dementia care in 67 care homes across England, Scotland, and Jersey - was acquired by Welltower.
Nov	Kathryns Homes	Healthcare Ireland Group	Healthcare Ireland Group, the fastest-growing care provider in Northern Ireland, acquired Kathryn Homes. The addition of 13 care homes to the Healthcare Ireland Group brings the organisation’s total to 38 homes across Northern Ireland, providing a wide range of residential, nursing, and specialist care services.