High costs and low returns will fuel nursing home shortage - CBRE
Estate agent CBRE says reduced healthcare spend in 2020 likely to focus on primary care
Ireland has an undersupply of nursing home stock and little or no specialist housing specifically designed for the elderly. Photograph: iStock
High construction costs and low returns mean investors are unlikely to put their money into nursing home schemes in the short term, according to real estate agent CBRE.
In a report on the Irish healthcare sector, CBRE is anticipating a slowdown in investment this year despite strong demand, particularly for nursing home places.
It expects about €200 million will be put into the sector in 2020 but that opportunities will “predominantly emanate from consolidation opportunities or in the primary-care centre market”, which is at an early stage of development in Ireland.
Healthcare, and in particular the lack of nursing home facilities has become a major focus of the current election campaign.
“Investors are clearly attracted to this sector as a result of the unique demographics prevailing in the Irish market,” Marie Hunt, CBRE’s head of research, said. “Ireland has an ageing population, an undersupply of nursing home stock and little or no specialist housing that is specifically designed for the elderly cohort.”
However, it said that “prohibitively” high construction costs, rising wage costs and more stringent regulations were likely to squeeze investment in the sector.
“Although there are several schemes in the planning process, the cost versus income equation is prohibitive and as a result, there is limited construction underway and very little in terms of new stock coming on stream,” it said.
If the State’s nursing home support scheme, Fair Deal, was increased, this could stimulate supply “but otherwise it will remain extremely difficult to rationalise development of new nursing home facilities in many parts of the country,” CBRE warned.
This year will see only a small number of new nursing homes opening for business, it said. These include a new 147-bed Care Choice facility in Swords in north Dublin and a new 120-bed Trinity Care nursing home in Dublin 7. “Outside of Dublin, there is little new stock coming to the market other than extensions to existing facilities,” the report noted.
Overall, CBRE’s report highlighted a pick-up in investment activity in the Irish healthcare sector in 2019, which it said mirrored the trend elsewhere in Europe, “whereby investors and funds are increasingly looking for opportunities in alternative sectors such as healthcare to take advantage of the structural demographic shift that is clearly in evidence in counties such as Ireland”.
“Several overseas funds started to make their presence felt in the Irish healthcare sector last year, acquiring both individual properties and platforms using a myriad of different structures in order to access opportunities,” it said.
The London-listed investor Primary Health Properties (PHP) intends to invest €300 million in Irish acquisitions up to the end of 2021, while MedicX, formerly owned by UK-based funds management group Octopus, has four primary care schemes currently up and running with a fifth on the way.