Property News Review of The Group

Healthcare Report

The latest Care Homes Review from Colliers International, which measures occupancy rates, average weekly fees, payroll costs, non-payroll costs and profit margins, has revealed that while average nominal weekly fees have increased steadily over the last two years, in real terms fee growth weakened significantly in the last year.

Salary and national insurance costs as a proportion of total revenue remained at the same level as reported in H1 2010 around 57% (nursing) and around 54%(care homes).

In the second half of 2010, non-payroll costs as a proportion of total revenue remained stable at 16% for both nursing homes and care homes.

The average level of occupancy across different sizes of care homes remains stable and in line with overall occupancy rates recorded for both nursing and care homes (91%). Occupancy rates were slightly higher (92%) for both nursing homes and care homes with 61+ beds.

Care homes in Scotland and the West Midlands registered the highest average levels of occupancy at 94%, whereas care homes in Greater London registered the lowest average levels of occupancy at 88% in H2 2010.

Jeremy Tasker, Head of Healthcare at Colliers International commented: “Care homes fees grew nominally by 6% over the same period although real growth only registered 2%.We believe a turning point has been reached and that weekly fees have seen a period of real decline due to local authority and government spending cuts.

“Fee growth has begun to show signs of weakening over the latest reporting periods, especially over the last year of high inflation. Annual average weekly fee growth fell in real terms by 3% for nursing homes and increased by a marginal 2% for care homes. Worryingly, these real decreases have been accompanied by overall operating cost increases in line with inflation; even the most efficient operators are coming under increasing pressure.

“The end result of reduced fees will be to further marginalise smaller inefficient operators, but also to put increased pressure on corporate operators to find further economies of scale. The end result of reduced fees will be to marginalise smaller inefficient operators, but also to put pressure on larger corporate operators to find further economies of scale. Where these additional economies are to be found is another question, especially given the increased efficiencies achieved in the recent past.”

Belfast