Towards future-proof residential care

The Dutch residential care sector is facing a major dual social challenge: it must significantly raise its game in terms of both capacity and quality levels, while at the same time evolving towards a more sustainable future. CBRE conducted an in-depth study of this sector, both to take stock of the current situation and to present viable solutions. The key takeaway from the study: joining forces is essential. I will explain why in this blog post, and will tell you how we can help you get to work.

What are the challenges facing healthcare real estate? 
As it turns out, these challenges are manifold. For one, we need a major capacity boost: research by CBRE shows that one in three houses built in the Netherlands between now and 2050 must be senior houses. This is the only way we can meet the growing demand for housing for the elderly. Whereas one in ten people in the Netherlands are currently aged 70 or older, down the line this will be one in five. Population ageing is a social challenge that affects us all, having a significant impact on the healthcare sector and our real estate. 

However, boosting capacity alone is not enough: we also need to improve quality levels. Many healthcare real estate properties across the Netherlands have become obsolete and no longer meet the needs of future elderly populations in terms of functionality, amenities and facilities and in terms of the conditions required for healthcare organizations and their employees. At the same time, healthcare institutions must start adopting more sustainable standards and principles. The healthcare sector is trailing far behind in this area: nursing homes and care homes consume an average of 189 kwh/sq. m. GLA – significantly more than owner-occupied homes and social-housing units, and even more than double the 70 or 80 kwh required for ‘Paris Proof’ real estate. 

This triple challenge calls for massive investments in our residential care services. The Dutch government has placed the onus on the sector by focusing on the further separation between housing and care, and by cutting budgets. However, healthcare organizations – which collectively own more than 50 per cent of all healthcare real estate in the Netherlands – are no longer automatically able or willing to fully bear the risk associated with substantial investments in suitable residential/healthcare real estate. It makes more sense for them to focus on their core business of providing healthcare. Real estate ranks second on their list of priorities, although there is growing pressure to upscale their operations. The current high energy prices are affecting organizations directly, and the current labour shortages have increased the importance for employers to foster a pleasant, safe and healthy work environment. The question is: how should all this be funded? 

What is the solution? 
The most obvious answer is: densification. Many existing healthcare facilities still have space available to add capacity while at the same time improving housing quality and sustainability. Densification is an excellent opportunity to future-proof our residential care in a variety of ways. If you group different user groups or demographics in or around a single location, you can provide more efficient, high-quality care. Additionally, concentrating regular houses near healthcare services provides the opportunity to create stronger social networks within communities. Senior citizens live among the other residents in the community and receive both formal care from organizations and informal care from family members, friends and neighbours, which contributes to the quality and appeal of the houses. 

If we are to achieve this, a shared approach is essential. Demolition followed by new construction is a long-term solution that is superior to conversion, and while the latter can certainly help to achieve the targets of the Sustainable Care Green Deal by 2030, further sustainability is needed for 2050. It is up to the healthcare sector to be proactive in this area in the coming years. New development is the best way forward in this regard, while at the same time using the available space to add capacity to existing healthcare facilities. 

This requires large amounts of funding – which is where investors come in. Investors have a lot to offer the healthcare sector: not only because they make the initial investment, but also because they subsequently bear the risk healthcare organizations are looking to avoid. Particularly if a healthcare organization, as the user of the building, has clearly defined its needs and requirements, there is a solid foundation for developing a future-proof plan together with a property developer or investor. The right property developer or investor is a partner in the process right from the outset – which means healthcare organizations can focus on what they do best. 

A good example of this type of partnership is that of the Vilente healthcare organization and social investor Sonneborgh. Read our case study about this project. 

How do we accelerate the transition? 
CBRE firmly believes that cooperation between healthcare organizations, property developers and investors is the perfect way to innovate and improve our residential care. The in-depth study we conducted within the healthcare sector shows that this is a substantial challenge. However, the same study also helps us to provide even better advice to the sector. For starters, we will use our data and our real estate expertise to identify the needs in the area in terms of innovation and improvement. We will then investigate the potential of existing locations and use this information to find the right partners and build alliances. If the situation calls for a new (temporary) site, we will find it through the use of data and our sector network. 

Property developers also have a great deal to gain from these types of partnerships, even if only because of the expansion and sustainability challenge for the healthcare sector. A growing number of local authorities are imposing quotas to ensure that a certain number of areas to be developed will be used for social purposes. Partners can then anticipate this by adding new senior houses and facilities, particularly where larger area developments are concerned. 

If you would like to learn more about the opportunities provided by CBRE and would like to schedule an appointment, feel free to contact me at Laura.Seckel@cbre.com .