UK care home sector remains resilient despite inflationary pressures

North East shows the most significant year-on-year growth at an approximate change of 5.5%

UK care home sector remains resilient despite inflationary pressures

UK care home operators have seen a three percent rise in occupancy levels, with several operators across the country now trading well above pre-pandemic levels, according to Knight Frank’s 2023 UK Care Homes Trading Performance Review.

The report, which collates data from across the UK care home sector and surveys operators on their individual performance, represents approximately 80% of the corporate market, totalling over 100,000 care beds across 781 UK towns and cities.

It has indicated that occupancy within the UK care home market is improving towards a normalised state with rates across the UK up to 86.4% in comparison to last year’s 83.4%. The report points that the North East shows the most significant year-on-year growth at an approximate change of 5.5%, closely followed by the West Midlands at 5.1%.

The case for the care home sector is further supported by operators seeing increased demand for beds and average weekly fees increasing by 9.6% to £1.074 per week, despite sector-wide EBITDARM having tracked back slightly to 25%. Regionally, the East of England has benefited from the most considerable fee increase in the year, at a rate of 13.5%. 

This comes as property costs and food costs have experienced cumulative rises of 33% and 89%, whilst the average cost of utilities based on the sample accounts for almost 50% of property costs, compared to last year’s 34%. Knight Frank therefore expects that newer as well as purpose-built homes will be most likely to benefit from economies of scale.

Julian Evans, Head of Healthcare at Knight Frank, said: “Overall, the trends presented in this report have, once more, highlighted the case for healthcare. The sector has been a topic of concern regarding its ability to weather storms ahead, and this is something that it continues to do tremendously well—for example, steady improvements in average occupancy year on year and the minimal compression of EBITDARM margins.

“While inflationary pressures are evident through rising utility costs, we are hopefully through the worst. With the economy beginning to compose itself, we seem safer from irregular flections and therefore hope to see operational costs stabilise somewhat in the coming year. We are, and always have been, optimistic about the sector’s outlook.”

Ryan Richards, Associate at Knight Frank, said: “Amidst the challenges of an inflationary environment, the UK care home sector has shown remarkable resilience. The rise in occupancy and growing demand for beds highlights the sector’s poignance as the UK’s population continues to age exponentially.”

Current projections highlight that the growth in the UK’s elderly population will potentially lead to a near doubling of demand for care beds by 2050. The country’s rapidly growing elderly population means that supply is failing to keep pace with demand despite a healthy new development pipeline. The UK elderly care market is at risk of reaching capacity by the end of the decade, heightening the need for new homes to be built and for existing homes to be futureproofed and modernised.

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