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The highs and the lows: the world of healthcare property through a pandemic


In 2019, healthcare property transactions had hit a record high of £1.76 billion, up 17 per cent from the £1.49 billion seen in 2018.

Within the market elderly care was, and still is by far the biggest sector, and comprised of 48 per cent of all transactions in 2019 – despite the uncertainty caused by what was then the biggest unknown: Brexit.

During the first quarter of 2020 the market had been looking to continue in this vein. There were significant investments from Aedifica, Impact REIT and Target Healthcare REIT in elderly care, as well as US REIT Medical Properties Trusts’ acquisitions of 30 BMI Hospital assets (the largest private hospital operator in the UK) for £1.5bn in January 2020.

Like many other sectors, however, the healthcare market took a pause during 2020 to cope with the unprecedented difficulties of the pandemic, with limited transactional activity.

Operational challenges

To assess the impact of COVID-19 on the market, consideration needs to be given to challenges faced by the sector’s operators. Almost across the board, we saw an increase in operational costs whether from required equipment such as PPE or from an increase in agency staff usage to cover sickness and those needing to self-isolate. As an example, HC One, the UK’s largest care home operator, at one time advised that six per cent of staff had been unable to work due to isolation.

Perhaps the biggest impact on operational performance however has been on occupancy. The pandemic sadly saw a marked rise in the deaths of elderly people, and of course, many of these were in care homes. Although there will be fluctuations at individual home level, across the market there was a peak drop around July / August 2020 where some homes saw occupancy drop by as much as 20 per cent. This also coincided with a lack of new admissions.

However by late 2020, care homes were generally in a better place financially as the sector demonstrated its tremendous resilience. Now there is a more positive trading environment with new admissions picking up, the majority of residents now vaccinated and infections decreasing.

One year on

Overall, we expect the sector to recover well from the effects of the pandemic but there will inevitably be some operators effected more than others. Government support was significant and there are pressures on this to continue through better state funding for what is a significantly under resourced sector. In addition, there is likely to be increased co-operation between the NHS and social care sectors which should be positive in the longer term.

As things improve and we pass the anniversary of the first lockdown, we are beginning to see activity pick up with increasing evidence of pent up demand for trading assets and property investments.

While we expect elderly residential and nursing homes to continue to attract most interest, there is also a growing healthcare retirement housing market which has seen significant investment from UK funds, notably Legal and General, and AXA with more large funds expected to enter the market this year.

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About the Author

Adam Lenton works principally within capital markets in healthcare transactions, overseeing deals with lot sizes of between £5m and £300m for both operational businesses and investment sales. He also provides strategic portfolio and real estate advice, exit strategies and portfolio valuations for a number of the largest care providers and healthcare funds both in the UK and Europe.

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Adam Lenton

Head of Healthcare


London - West End

Working principally in the capital markets in healthcare transactions, overseeing deals with lot sizes of between £5m and £300m for both operational businesses and investment sales. Also providing strategic portfolio and real estate advice, exit strategies and portfolio valuations for a number of the largest care providers and healthcare funds both in the UK and Europe.

Specilaist sectors include elderly care, private hospials, senior living and specialist adult services.  

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