Care operator margins will continue to be squeezed, says Christie & Co

Average business property prices increased across all sectors, with care up 5%, according to the latest report, Business Outlook 2017, by specialist business property adviser, Christie & Co.

Richard Lunn

Richard Lunn

Richard Lunn, managing director – Care at Christie & Co said: “Cost increases such as the introduction of National Living Wage, the recruitment and retention of qualified staff and added regulatory burden all continue to squeeze care operator margins across the UK.

“In December 2016, 26% of care homes were rated as requiring improvement by the regulator and worryingly, 2% rated inadequate. With many owners being forced into closure by lack of funding support, the recent announcement that local authorities will be able to raise council tax by 3% over each of the next two years to fund social care is a positive move for care businesses, albeit a short term solution.

“Looking ahead to 2017, we anticipate a busy year with more portfolio activity and continued churn by corporate operators with an increase in larger portfolio transactions and refinances likely. The market for quality homes remains robust, with many operators and investors chasing the limited supply of newer purpose-built or remodelled services, and values for this type of stock have remained strong.

The reduction in the value of sterling has made the UK market more attractive to overseas investors, in particular China and Malaysia together with existing interest from American REITs and operators, and we therefore expect interest from foreign buyers into the UK care market to increase in 2017.”

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