Healthcare sector resilient but still facing challenges

Colliers International’s latest edition of its Healthcare Market Review reveals that in the last twelve months, the sector has continued to provide occupancy, income and fee challenges and opportunities in equal measure however overall, the healthcare investment market is still attracting great interest.

In contrast to the more positive pattern of recent years, there have been generally negative trends in the elderly, personal and specialist care sectors but the nursing sector has proved a little more resilient.

Colliers’ 23rd edition of the Healthcare Market Review provides an in-depth analysis of the healthcare property and business sector, focusing on key drivers of the care home industry, covering occupancy rates; average weekly fees; payroll and non-payroll costs and profit margins.

The research shows that the personal care sector has seen pressure this year, with static fees and only a small increase in average occupancy levels (0.1 percentage points since H1 2016 to 91.8%). With rises in RPI in recent periods, personal care fees have fallen over 3% in real terms over the year. Whilst non-payroll costs have remained static, there has been a marked increase in payroll costs over the last half year. Overall, profit levels have fallen for the sector.

Within the nursing sector, occupancy levels have fallen to below 90.5% in H1 2017 (down 0.7 percentage points since H1 2016) but fees have risen by 5.2% in nominal terms and 1.9% in real terms in 2017, continuing the strong growth seen last year. With small variations in payroll and non-payroll costs, profit levels in general show only a small decrease in percentage terms so overall, resulting in a generally positive picture.

Adam Lenton, head of healthcare at Colliers International commented: “Demand for quality care provision in care homes, through primary care and the NHS, continues to intensify. This is offset against limited progress with improved facilities, planning regulations, staff recruitment and retention and private investment – and that’s before we make a dent in the Brexit negotiations and the ensuing ramifications of our departure from the EU.”

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