Sector trends
‘churn’ rate (entries/exits) for older people’s care homes in any given year is only about 5,000 beds (a little more than one per cent of capacity) and is showing no signs of increasing – see Chart 3. At this rate, several decades will pass before the care home sector could be modernised through new developments replacing the old alone.
The profile of care homes for younger adults (age 18-64) looks very different. With the emphasis rightly on small scale from both commissioners are regulators, it is no surprise that only 29 per cent of registered capacity is in purpose-built homes. Small-scale refurbished portfolios are not attractive to property investors, except for specialised funds like Civitas and Triple Point, and it is not surprising either that investment for ‘modernisation’ of younger adult care home stock is less readily available than for older people’s care homes. Conversions will continue to dominate this segment of the market for the foreseeable future.
It is for this reason that refurbishment and refitting of existing premises must be seen as the principal route towards further modernisation of the care home sector.
Modern construction and design can take care home environments to a new level of amenity and comfort
The scale of investment, mainly funded by banks, is impressive, and it has already led to the virtual disappearance of shared rooms and an ensuite penetration rising to about 70 per cent. The coming challenge is now Net Zero. Ambitious targets for carbon neutral buildings, if applied to existing care homes, will require substantial retrofitting to avoid ‘stranded asset’ situations. Retrofitting of existing premises is technically feasible, but it can be expensive and will require continued confidence in the sector from banks. This in turn further highlights the importance of pressing home the ‘fair price for care’ message. Council commissioners must not only be aware of the need for care homes to remain viable under ‘business as usual’, but also take cognisance of the need for investment to keep carbon emissions within limits which will become increasingly stringent. n
William Laing
William is an economist and the driving force behind LaingBuisson. After graduating from the London School of Economics (BSc Econ) he began his career as an economist with the Association of the British Pharmaceutical Industry. He moved to the ABPI-sponsored Office of Health Economics where he was appointed deputy director. He left at the end of the 1970s to set up Laing & Buisson (now known as LaingBuisson).
Specialist finance for Care Homes
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Braemar Finance is a trading style of Close Brothers Limited (“CBL”). Close Brothers Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (firm number 124750). Close Brothers Limited is registered in England and Wales (company number 00195626) and its registered office is 10 Crown Place, London, EC2A 4FT.
October 2024
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