Flight to safety

It’s safe to assume 2020 saw a number of ‘records’ and ‘industry firsts’ across most aspects of our economy. The Covid-19 pandemic disrupted the world in many ways and even now – 12 months into this phenomenon – it’s arguably too soon for us to understand fully the long-term ramifications.
Of the many sectors rocked by this past year, real estate investment must be one of the most transformed. Covid-19 ripped apart all the norms concerning our relationship with ‘place’ – and left investors with capital in offices, retail, hospitality and tourism destinations with some serious questions to answer and messy situations to resolve.

It’s perhaps no coincidence that a period of pandemic also produced a ‘record year’ for investment into healthcare property. According to the team at Knight Frank, no less than £2.7 billion was invested into the sector – up some 55% on 2019.

At a time when we were told to ‘stay home, save lives’ most non-residential properties have remained largely dormant. Healthcare facilities, clearly, have not. There have been days where, quite literally, the NHS has been on the brink – and the numbers being admitted to hospital in January (at one stage, more than 4,000 a day) shocked the nation. The essential nature of healthcare facilities, however, has never been more evident.

And it is not just hospitals we can’t live without. The wider network of care homes, private hospitals, housing-with-care, specialist care units and mental health facilities have all performed their vital duties throughout the crisis and, for investors, this surety of income in an uncertain world is surely the main driver of 2020’s record performance.As the Knight Frank report shows, the profile of capital in the sector is also evolving. Once a market predominantly for specialists, we’re now seeing institutional firepower, overseas investors, a growing selection of REITs, and private equity remaining a major player, especially in the mental health space.

One further interesting trend is the partnering of specialist investors with more established institutional funds. In recent times we’ve seen Schroders partner with both Civitas and Octopus Real Estate respectively, while in this current issue (see page 15) PGIM Real Estate has teamed up with Elevation on a new build care home fund, and in the retirement village sector established operator Audley Group formed a joint venture with the Royal London Pension Property Fund for an £80 million project in Buckinghamshire.

As we emerge from the pandemic much is uncertain and making predictions is a fool’s game – but even in these curious times you wouldn’t bet against 2021 surpassing the previous year when it comes to healthcare real estate.

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