CBRE: Sufficient capital to upgrade healthcare institutions

Amsterdam, 27 January 2022 – Investors will have access to sufficient capital in the coming years to make a significant contribution to the renovation of severely outdated nursing homes and healthcare complexes and to upgrade them to meet the new climate targets. Investors can take over the investments in real estate modernisation faced by healthcare organisations. They will invest an estimated Є1.2 billion in healthcare real estate this year. The willingness of investors to invest is not an obstacle, but the lack of supply is.

These are the results of real estate consultant CBRE’s Market Outlook 2022. In its annual Market Outlook, CBRE publishes and analyses the figures for the past year and provides a substantiated forecast for the coming year.

Transition to energy-neutral redevelopment
The Netherlands has some 19 million sq. m. of real estate for elderly care, 59% of which is more than 30 years old (built before 1990). For some of these buildings built before 1990, the strategy will be to discontinue investing in the existing real estate and instead focus on energy-neutral redevelopment, expanding the capacity where required.

The climate targets necessitate the sustainable development of the healthcare real estate sector, sometimes involving major and costly projects. These investments present budget-dependent healthcare organisations with a dilemma. The investments are necessary, but they should not be at the expense of care. Investors can help here. If they take over the real estate, the healthcare organisations will have more time to carry out their primary task: the provision of care. Past successes with sale-and-lease-back transactions (where the healthcare organisation leases part or all of a property back after the sale) and long-lasting partnerships have demonstrated that such cooperation can work.

Successful partnerships
“In some cases, renting a property is cheaper than owning it, and sale-and-lease-back is then a good solution,” says Laura Seckel, Director Healthcare at CBRE. “One such successful partnership involved a major transaction in which a healthcare organisation sold its residential care apartments to an investor. The organisation continued to provide care to the residents, but no longer bore the responsibilities of property ownership. Another major sale-and-lease-back deal involved the sale of two residential care complexes in the province of Utrecht for €30.5 million. The seller, a provider of care, housing and services for the elderly, is now able to go ahead with a renovation and redevelopment project while continuing to serve its target group with care in the two residential care complexes.”

The investment volume in Dutch healthcare real estate was limited to €850 million last year, due to a lack of supply, and cooperation between investors and healthcare organisations has been slow to take off. According to Seckel, this is also reflected in the increase in investment volume over the past year, almost half of which changed hands in the last three months. CBRE expects this trend to continue. “The trend is mainly driven by the major investments required in the healthcare real estate sector and the social necessity of this development.” In view of the high demand for investment in healthcare real estate, CBRE anticipates a volume of €1.1 to 1.2 billion in 2022, with initial yields continuing to fall for the meantime.

Real estate connecting people
Major investments are also required in the urban environment. “The city has to meet the housing needs of its many elderly residents and others who require care,” says Seckel. “The anonymity of city life can easily lead to social isolation, something we saw happening a lot at the height of the coronavirus crisis. While the city could actually be the ideal place for these people to live and meet; an environment where they can remain socially active and live independently for longer. This requires a form of real estate that connects people, generations and functions. These could be mixed use buildings with suitable housing for seniors and high-quality care facilities, so that the elderly and others in need of care can continue to have a place in urban society.” 

Partnerships between healthcare providers and investors can work particularly well for healthcare real estate, with all parties benefiting from the professionalisation that has taken place in recent years. This development is also visible in primary and secondary healthcare centres, where the demand for care will only increase as a result of population ageing. The number of investors with the specialist knowledge required to invest in these segments is increasing.