Real estate investors: care homes in focus

For a long time, care and health care properties were not very attractive to project developers. However, since living space for older people is missing in many places, more and more investors are becoming aware of the care home sector.

There is a shortage in barrier-free housing for age-appropriate living. The demand for senior homes will increase in future years. Source: pexels.com

On the real estate market, care and healthcare properties have not necessarily been among the best-selling properties in recent years. However, this has changed with the low interest rate phase and the resulting investor rush for real estate. Healthcare properties and care homes do not come out of their niche, but are increasingly in demand. The demographic change contributes to this. Even though people are getting older and older – suitable care facilities are still scarce.

Transactions in care properties on the rise

The year 2018 marked a new record: more than three billion euros were invested in the care homes sector. At first glance, investments have decreased again significantly after this high in 2019. After three quarters, only 1. 3 billion euros were invested in nursing real estate transactions. However, according to Dirk Richolt, Head of Healthcare Real Estate at real estate service provider CBRE in Germany, there is a simple reason for this. “After the record years, the healthcare market lacks a sufficient range of products in which interested players could invest,”; he says. Last year’s record was marked above all by very large transactions. For around EUR 810 million, the French investor Primonial secured a 50 percent share in a rehabilitation clinic portfolio of the Medical Properties Trust. Deutsche Wohnen spent 680 million euros on the purchase of 30 care facilities with 4,700 units. These two sales alone were worth more than all transactions in the first nine months of 2019 together.

Care properties as market of the future?

Apart from the records of 2016 and 2018, investments over the past ten years have always been below one billion euros. Despite rising demand, the healthcare real estate segment remains a niche market. The sector accounts for just 3.4 percent of the total turnover of the entire commercial real estate market. Demand for care facilities will rise sharply in the coming years due to demographic developments. In “Pflegeheim-Atlas 2018″ for example, the real estate consultant Wüest Partner assumes that the number of people in need of care – of whom there were around 2.9 million in 2015 – will rise up to 3.8 million by 2035. For that reason, the market for care and healthcare properties continues to be extremely popular for investors and private investors.

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