UK healthcare real estate market has attracted more than £3 billion investment in 2019, which was double that recorded in 2018 at £1.5 billion, according to Savills latest Healthcare Market in Minutes.
The firm notes that this increase in transaction volumes was predominantly as result of continued appetite from UK-based institutional investors and REITs attracted by long leases and indexed rental uplifts, as well as renewed interest from overseas buyers.
Savills research highlights that US REITs have been particularly acquisitive following a year of limited activity and less than £300 million invested between 2015 to 2018. However, in 2019 US REITs invested more than £1.95 billion in to UK healthcare real estate assets across four separate transactions. The largest of which was Medical Properties Trust acquiring 30 private hospitals for £1.5 billion. Medical Properties Trust also acquired eight private hospitals from Secure Income REIT at a sub 5% yield for £347 million.
”Over the past year we have seen the spread of investors into the healthcare market become more international.”
Craig Woollam, head of healthcare at Savills, comments: “In a world where we are seeing changing occupier behaviour result in shorter leases in the mainstream commercial property market, healthcare assets continue to offer the longer-term lease lengths and inflation-linked rents that pension funds find so attractive and is a key reason why the market has seen such a significant increase in interest from REITs, as well as the emergence of specialist healthcare REITs.
“Over the past year we have seen the spread of investors into the healthcare market become more international. While the US were particularly dominant, we also saw capital come from Europe, the Middle East and Asia, all of which are now competing with domestic money for buying opportunities.”
Savills report shows that it was the independent hospitals that proved most popular with investors accounting for just under 70% of healthcare investment in 2019. UK care home investment saw a decrease in 2019 to £615 million from £1.2 billion as result of the continued lack of quality stock available in the market.