Care home market at 14-year high

The business property advisor reported a 14-year high in the level of demand and volume of care homes transacted by its care team in 2022, with 42% more deals brokered than in 2021. At the launch of the report, global managing director Darren Bond said care was one of the company’s strongest markets, along with childcare and education and the dental market.

‘Business outlook 2023: finding clarity’, makes a number of predictions for the year ahead. These include:

• Demand for good-quality assets and general buyer sentiment will remain strong

• The trend of an increasing number of operators taking leases is likely to continue

• Sale and leaseback finance will continue to underpin a notable number of transactions, although yields may soften as a consequence of wider macroeconomic factors

• Occupancy should fully return to prepandemic levels by year-end

• Workforce challenges and cost inflation are likely to remain as the two key operational headwinds

• More signs of distress will likely emerge, particularly for smaller olderstyle assets which are reliant on local authority funding

• Further transactional activity in the operating company market. The report reveals interest from a range of buyers, including a number of new European organisations looking either to enter the UK market or increase their presence. Last year, 48% of Christie & Co’s care deals were concluded to buyers located more than 100 miles from the target business, up 19% since 2015. Corporate investors accounted for 33% of Christie & Co completions in 2022, up from 22% in 2018.

Richard Lunn, managing director, care at Christie & Co, said: “The sector continues to be impacted by cost pressures and workforce issues – challenges not unique to care – yet 2022 demonstrated, yet again, the strength of both the sector and the market itself, as we saw record levels of demand and transaction volumes last year along with strong pricing. We remain optimistic for the year ahead that, despite headwinds, the care sector and its fantastic workforce will thrive.”

As part of its annual price index, Christie & Co notes a 2.7% increase in pricing in 2022, which reflects a strong appetite for care, although this is tempered by increased interest rates, capital costs and operational costs.

Last year the number of closed care homes transactions decreased, accounting for 13% of Christie’s deals. Four out of every five vacant care homes were bought by care home providers. Where the sale was for ongoing use, larger homes were generally sold to elderly care providers looking to reposition the care home in the market, and smaller homes were often acquired by specialist care providers and supported living operators.

“The vast majority of transactions have gone to existing operators, people who understand the sector and believe in its long-term future,” said Lunn.

Christie’s own research found 30% of respondents were looking to buy in 2023, 26% to sell, and 7% to both buy and sell. When asked about their sentiment for the year ahead opinion was split down the middle, with 34% feeling positive, 34% feeling negative and 32% feeling neutral.