The investment appetite for healthcare real estate remains strong with traditional assets like nursing home development.
Healthcare real estate and service deals are well on their way to reaching their highest level in 25 years as assets like nursing homes and mental health facilities come up for sale.
Total investment in healthcare real estate in the UK has grown to £ 2.24 billion (US $ 2.32 billion) by 2020. That's a 25% increase from £ 1.76 billion for full 2019, according to research by Frank Knight.
The global real estate consultancy predicts transaction levels in the final quarter of 2020 will be heading towards their highest levels since 1995, with a number of high profile deals in the market and in the pipeline.
These include The Priory Group – England's largest provider of mental health care – which was put up for sale by its US owner Acadia Healthcare for an estimated £ 1.5 billion in September
Also on the auction block are mental services provider Elysium Healthcare, owned by private equity group BC Partners valued at around £ 900m, and Keys Group, provider of care and educational services for children valued at around £ 250m.
Other specialist mental health and learning disabilities providers valued at £ 3 billion and larger health care transactions valued at £ 1 billion are also available, Knight Frank said.
Read: The case of defusing nursing homes and replacing them with a radically different model
Julian Evans, director of health at Knight Frank, said there are currently two distinct investment silos: institutional capital that is chasing fixed income social security such as real estate and private equity, and infrastructure funds that seek out specialized companies.
He added that the COVID-19 pandemic had shown healthcare real estate as a haven, with investor appetites for the sector remaining strong in both more traditional assets like nursing home development and the increasingly popular mental health services sector.
This demand is only compounded by the limited supply in the healthcare market coupled with an awareness of the ever-growing demographics of these assets that power the sector.
"As a result, there will undoubtedly be an escape to quality when investors look for defensive health goods, and we expect investment in the sector by a broad church of domestic and foreign investors to continue to grow," he said.
Knight Frank's projections come despite several companies in the sector coming under pressure as the minimum wage has risen, driving costs up, and funding for councilors in need of money has decreased.
In October, the administrators of Four Seasons Health Care launched a process to sell their nursing homes in Northern Ireland. The holding companies behind Four Seasons – Elli Finance (UK) and Elli Investments – went into administration in April 2019 after struggling to pay off their debts.
In April of this year, the Spire Healthcare Group
The company has 39 hospitals in the UK and has a covenant waiver with the banks. RBC Capital raised its share price target for the share by nearly 50% on Nov. 4, amid concerns that new data eased concerns that forecasts were overly optimistic for the private hospital group.