Healthcare real estate: demand persists

 


In recent weeks, the need to have good accommodation for our healthcare has become increasingly evident. Healthcare institutions themselves have focused on organising effective care and largely postponed any real estate decisions. Healthcare insurance companies and the government are stepping in to compensate for lost revenues, making healthcare real estate an even safer investment option. However, there is still a lot of uncertainty in healthcare institutions and almost all expect to see revenues fall in 2020. Despite this, we do not expect to see healthcare institutions facing major financial problems.

Decline in turnover and additional investment costs


In order to ensure sufficient space in intensive care and prevent other patients from running unnecessary risks, a lot of regular and scheduled healthcare has been temporarily suspended. Nursing homes, for example, have also closed and have admitted very few if any new residents. At the same time, there have been additional investments in such areas as extra intensive care beds, the introduction of the 1.5-metre social distancing rule, extra cleaning and sufficient PPE. Fortunately, regular healthcare is now being cautiously upscaled, but healthcare institutions are still seeing revenues decline.


Postponement of construction projects and real estate decisions

Because healthcare institutions have focused in recent weeks on achieving sufficient intensive care beds, fitting out wings for Covid-19 patients or obtaining sufficient amounts of PPE, many other activities have been temporarily suspended or postponed. This also applies to some ongoing construction projects and real estate decisions that are pending. As the first major peak of coronavirus infections passes, we are now seeing healthcare institutions slowly begin to focus on other areas and the resumption of several construction projects.

Demand for healthcare real estate persists

Before the coronavirus struck, there was an increasing shortage of suitable residential and other healthcare locations. Alongside the now-postponed issues affecting existing real estate, there will also be continued demand for expansion even after the corona crisis has passed. This applies not only to good residential healthcare locations and innovative concepts, but also to new health centres, for example.

Investors and developers wishing to develop this healthcare real estate are often still struggling to find the right locations. Collaboration between healthcare institutions, investors, developers, housing associations, banks and municipalities will be key to this. However, we have noticed that many municipalities still have no formal policy documents on residential care, which means that they often have insufficient understanding of the issue. Now would be a good time to compile a vision of this kind.

We expect relatively few healthcare institutions to face real financial problems. However, there will certainly be some healthcare institutions with worse financial situations than before the coronavirus pandemic. These healthcare institutions will be well advised to subject their real estate portfolio to careful scrutiny before making any decisions. This could involve seeking a partner for developments that they originally intended to pursue at their own risk.  

Healthcare real estate investment volume

Investments in healthcare real estate accounted for € 124 million in the first four months of 2020. Although this may be a significant decline compared to the same period in 2019, the more positive news is that almost half of this volume came from transactions in the months of March and April. We are also seeing tentative moves towards several transactions for the month of May, indicating that the healthcare real estate market remains active.




 



Almost all health care institutions expect revenue decreases for 2020. However, this is not expected to lead to major financial problems, given the support from the government and health insurers. The shortage of new residential care locations continues to rise, while at the same time the demand for investment objects remains. This shows that there are opportunities for all parties.


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