The report, UK Alternatives Investment Index: H1 2019, provides an overview of currently achievable yields on prime and secondary investments across various subsectors. The report finds that the average yield on prime investments across UK alternatives as a whole ranged between 3.5% and 7.5%. Comparatively, the three medical subsectors Christie & Co examined generally showed more compressed yields, indicating that they can offer a more secure investment class.
Within the report, Christie & Co finds that dental practices demonstrate yields of 5% to 6% for prime and 6% to 9% for secondary investments. While the investment market is currently dictated by the covenant strength of individual sites, generally providing limited opportunities, it is beginning the migrate away from single operators towards corporate groups and this will introduce higher quality sites and improve yields.
Pharmacies show average yields of 5.5% to 7.5% and 8% to 10% for prime and secondary investments respectively, in Christie & Co’s report. The pharmacy market is relatively fragmented, both in terms of operator and property ownership, with 50% controlled by independent operators and the rest split between supermarket or large corporates, while premises are owned by a mix of public and private proprietors. This immature stage of the market means that while smaller investment opportunities currently exist, as the sector matures better opportunities will develop.
GP surgeries show yields of 4.5% to 5.5% and 5.5% to 7% for prime and secondary investments, which are among the most compressed of the medical subsectors examined, highlighting the attractiveness of the space. Increased security seen by the NHS-backed rental scheme and the rise in tenants future-proofing their surgeries has these investments a relative safe haven, and as an ever-relied upon resource by the population, will only ever continue to be in demand.
Simon Hughes, Managing Director – Medical at Christie & Co comments, “The Pharmacy and Dentistry sectors are highly fragmented and relatively immature investment markets, made attractive by the relatively low risk of the trading businesses. The GP sector is far more mature as it is effectively underpinned directly by the NHS and attracts a completely different class of investor.”