Investment Market Commentary
THE HEALTHCARE INVESTMENT MARKET CONTINUES TO ATTRACT GREAT INTEREST, ESPECIALLY AS ITS RESILIENCY IN THE FACE OF BREXIT CHALLENGES HAS BEEN VERY APPARENT.
Reviewing UK REIT performance since the EU referendum in June 2016 shows that healthcare properties performance, as measured by share valuations, were affected less and recovered faster than mainstream UK property asset classes, especially those with exposure to central London.
Ex-London assets and assets secured by long operational income linked to the real economy look to be generally affected less by Brexit than those with greater exposure to the financial economy. In contrast to the EPRA UK indices as a whole, which remain down by 3% since June 2016, Healthcare REITS are up by between 11% to 15%.
After the Impact Healthcare purchase of a 56 care home portfolio in February for £149m at 7.6% IY, investment activity has been steady. Croftwood bought a portfolio of 18 care homes in March for £25m and Omega bought a portfolio of 18 care homes in May for £87.5m. Recent deals were completed by Target Healthcare in July in Melton Mowbray and a forward funding in Birkdale. New build care homes in the south continue to attract the highest levels of demand with yields regularly being quoted in the 4%’s and 5%’s. Yields for comparable properties outside of London are ranging from around 6% to 7%. In the primary care space, PHP and MedicX have been active, both acquiring portfolios and several standalone assets since the beginning of the year.
According to IPD, in 2016 care home total returns amounted to 5.2% compared to 9.3% for primary care. The difference is linked to stronger capital growth in the primary sector. So far in 2017, these trends look unchanged.
WALTER BOETTCHER DIRECTOR OF RESEARCH & FORECASTING
COLLIERS INTERNATIONAL | HEALTHCARE MARKET REVIEW 2017
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